The World Bank is planning financial support to Ukraine worth $1.5bn (£1.2bn) to help keep critical services running as the country fights a fresh assault by Russia in Vladimir Putin’s ongoing war.
The bank said the funds would be used to support the continuation of key government services, including wages for hospital workers, pensions for elderly people, and social programmes for vulnerable people.
In addition to $944m of emergency financing already mobilised by the World Bank, the institution said it was preparing the fresh funding to help essential government services continue to function during the war.
The $1.5bn investment project financing includes $1bn of support through its International Development Association arm, as well as $472m in funding guaranteed by its International Bank for Reconstruction and Development division.
Announcing the funds in a speech in Poland on Tuesday, David Malpass, the president of the World Bank, said the organisation was providing immediate working capital for companies providing critical supplies to Ukraine.
“We are working to help Ukrainian refugees as they plan their return home, help host communities as they absorb Ukrainians, and help the many millions of internally displaced persons in Ukraine who have lost their homes and livelihoods,” he said.
Founded in 1944 to help Europe rebuild after the second world war, the Washington-based organisation includes Russia and Ukraine as members. Malpass, who met the Ukrainian president, Volodymyr Zelenskiy, in Munich on 19 February, days before the outbreak of the war, said the bank stood “ready to help Ukraine with reconstruction when the time comes”.
The head of the global development body said it was analysing the impacts of the ongoing war, including the rise in food and energy prices expected to have a severe impact for low-income countries around the world. “[We are] preparing a surge crisis response that will provide focused support for developing countries,” he said.
The World Trade Organization has downgraded its global trade growth forecasts for the year, saying the prospects for the global economy had darkened since the war started on 24 February.
With sweeping sanctions imposed by western allies in response to Putin’s war, the Russian economy is expected to fall into a deep recession. A former Russian finance minister, Alexei Kudrin, said the economy was set for the biggest contraction in economic output since 1994, when the country was struggling to recover from the collapse of the Soviet Union.
Kremlin economy and finance ministers are working on new forecasts, the RIA state news agency reported. “The official forecast would be for more than around a 10% contraction,” said Kudrin, who served as Putin’s finance minister from 2000 to 2011, according to the report.
The World Bank said last week that Russia’s economy was forecast to contract by 11.2% this year, while Ukraine would suffer a plunge of 45.1% given the magnitude of the humanitarian crisis unleashed by the war.
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However, the conflict is also leading to global disruption, with a sharp rise in prices for energy, fertiliser and food. Together, Russia and Ukraine account for more than a quarter of global wheat exports, with lower-income countries in the Middle East and north Africa among the biggest buyers.
Malpass warned that the war in Ukraine and continuing Covid lockdowns in China were affecting the global economic recovery from the pandemic.
Speaking ahead of the spring meetings of the World Bank and the International Monetary Fund next week, he said poorer countries would find it harder to respond to the shocks than wealthier western nations.
“The repercussions are worsening the inequality as the war affects commodity and financial markets, trade and migration linkages, and investor and consumer confidence,” he said.
