Ukrainian economy discussion at Stanford University

31.03.2015 |

On March 25 renowned international economist Anders Aslund (Peterson Institute for International Economics) made a presentation on the economic situation in Ukraine at Stanford University. He outlined three major risk factors the Ukrainian economy faces now: military conflict in the east of Ukraine, underfunding and economic instability. In his view, the most dangerous factor is a military conflict because of its unpredictability.

In regard to underfunding, Prof. Aslund had emphasized lack of substantial financial support to Ukraine from the U.S. and European Union. He called it very hypocritical just to pay a lip service in time of Ukraines great needs. Real financial help came only from the IMF after Ukrainian Parliament had adopted harsh measures required by the IMF. Although measures are highly unpopular they are absolutely necessary to put Ukrainian economy back on truck. They actually stopped a financial meltdown that occurred on Febr.23-25 when state reserve decreased below critical level. Surprisingly some funding is also available from China.

Military confrontation is the number one contributing factor to increase of poverty and economic instability in Ukraine. In Aslunds viewed the armed standoff contributes to a 5% decrease of GDP, which at the present time is estimated as low as $80 billion. This military crisis not only decreased industrial output and trade but caused severe destruction of infrastructure in Eastern Ukraine.

Corruption is still a big problem as well as the foreign infiltration of the Ukrainian government. The current coalition government seems to be working well by creating a level of checks and balances necessary for uprooting corruption. Prof. Aslund suggested use of the East German model of lustration, especially in the Ukrainian complex judiciary structures, to eliminate corruption and make state system more transparent.

Most of Aslunds praise went to the vibrant Ukrainian civil society which keeps the government under constant scrutiny. In his words nobody trusts the government. A volunteering spirit has infected enormous number of people of different ages from different walks of life. In his view well educated and experienced members of the Ukrainian Diaspora as well as loyal foreigners can help to fight corruption and alleviate significantly many other Ukrainian problems. In Aslund view although the situation remains volatile things are really moving in Ukraine and Ukraine has a new chance to reform and save itself.

Anders Aslund is the author of the forthcoming book Ukraine: What Went Wrong and How to Fix It, scheduled to be release this April.

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