War Amid Shortage: Structural Vulnerabilities of Ukraine

Ukraine, a nation in Eastern Europe, has been entangled with many shortages,  which aggressively affect its economy, education, healthcare, infrastructure and security. The prevalence of such severe shortages is bound to have significant and serious implications for the nation’s economic front and put the Ukrainians’ future in the shadow.

Illustration by The Geostrata

This article aims to study the shortage dynamics of the crisis and its economic implications through a keen observation of economic indicators and reviewing statistical data like low GDP, unemployment rates, and inflation levels, pointing out the structural vulnerabilities and how they can affect the economy in the long run.

SHORTAGES IN ESSENTIAL SERVICES

The scarcity of energy resources, food and agriculture, and industrial supplies compounds the recessionary economic conditions. The nation's economy worsens due to the growing reliance on imported energy resources. Food insecurity has been caused by the lack of necessities and food staples, leading to an unstable economic system.

Furthermore, the industrial sector has been severely hit by the manufacturing sector's downturn, which has resulted in a sharp decline in economic activity. The healthcare sector is also severely affected due to the ongoing war circumstances.

The insufficiency of healthcare facilities and medical professionals highlights the critical state of medicine.

With such a weak healthcare sector, it has become very challenging for patients to seek medical treatments, even in an emergency. Access to medical facilities has widened the rich-poor divide, making healthcare available only to the affluent class. The lack of such facilities has built an overpowering pressure on the healthcare system, affecting the core quality of the services offered.

The social and economic infrastructure is also subjected to basic inefficiencies and setbacks, be it transportation, water, sanitation and hygiene, housing, etc.

The significant deterioration in the sanitation standards and scarcity of water is disposing of Ukrainian vulnerable public health; improper housing is not only leaving the natives without adequate shelter but also forcing them to seek asylum in safer neighbouring states. Ukraine’s electricity demand has fallen by about 40% since Russia’s invasion, with no sign of recovery, indicating the infrastructural incompetence.

DEFENSE INDUSTRY SHORTAGES

Potential shortages in Ukraine's arms sector encompass insufficient army manpower, border surveillance, administration and control, and military hardware.

The lack of access to contemporary weapons and military hardware dismantles the defence sector's efficiency in defending itself in conflict.

Inadequate resources for border control exacerbate threats to national security, whereas a shortage of police also increases the incidence of domestic crimes and public safety problems. It is imperative to advocate for these inabilities to protect Ukraine's national security framework and sovereignty.

IMPLICATIONS OF FISCAL DEFICITS

The extent of the shortages has spread roots all over the economy, which is evident in the widening fiscal deficit and the inefficiencies of the banking sector. The fiscal deficit is increasing in double-digit figures, as the Ukrainian government is spending excessive funds on imported resources like energy sources, food essentials, minerals, industrial supplies, etc., to remove the scarcity-driven price hikes.

The banking sector is also struggling with significant liquidity issues, as the industrial sector cannot access vital resources. This is leaving the country’s finances under huge credit risks and uncertain recovery of loans.

These shortfalls demand urgent attention to policy measures that address structural inefficiencies, fiscal discipline, and sustainable growth. Nations have granted aid to Ukraine to combat the prevailing circumstances, but the shortages include multifarious complexities and challenges.

Despite all such measures, Ukraine’s economy is bleak and is even deteriorating. The nation's geopolitical environment, such as ongoing disputes and war tensions, has an impact on how nations distribute and carry out their safeguarding mechanism or aid. Long-term developmental planning could help the Ukrainians solve the scarcity problem and construct a strong defence.

The existing geopolitical relations, global trends, and past collaborations with neighbouring countries can also be considered while understanding the aid's indirect influence. The shortages faced by the Ukrainian Economy will, as a result, yield very significant impacts on global politics and its dynamics with surrounding nations.

Evidencing Russia’s annexation of Crimea in 2014 and prevailing tensions in eastern Ukraine, the country is badly grappled with heavy fiscal deficits and financial burdens from various international bodies and governments, mainly composed of the IMF, which has extended the bailout packages many times.

These financial rescue instruments often bring a broad scope of interference with foreign policies and create a sustainable dependency on other countries. Nevertheless, the dominating energy base of the Russian economy throughout history never enabled Ukraine to have a monopoly; instead, it stressed significant vulnerabilities for Ukraine.

The disputes over the rising prices of petroleum, natural gas and transit fees have sparked logistical interruptions, showing Russia’s audacity to influence Ukraine through Economic means. Recently, the US House of Representatives passed a $61 billion aid package for Ukraine, which is bound to have some potential economic implications.

The package includes $13.8 billion exclusively for the purchase of weapons to strengthen its defence front against Russia. The $8 billion non-military aid is committed to the government's functioning and providing a standard of living to Ukrainians.

This aid highlights the continuous commitment and support of the US for Ukraine. The aid reflects the bipartisan support for Ukraine. At the same time, many can raise questions about the long-term relations and implications of such aid.

In conclusion, the ongoing shortages plaguing Ukraine highlight the complex nature of its economic circumstances and the immediate need to resolve the prevailing issue. In addition to this issue, the critical scarcity of natural resources, energy, food staples, and industrial supplies not only absorbs a good portion of the government budget but also brings about a recessionary situation in the economic setup.

The inefficiencies of the education, healthcare, banking and other sectors also exacerbate the economic downturns and make the fiscal structure brittle.  A diversified approach is needed to alleviate the shortage crisis; short-term measures can be adopted to combat the socio-economic challenges, and long-term strategies can be used to improve structural resilience.

Furthermore, to minimise the adverse consequences of the budget deficit at a macro level, policies to establish a sound fiscal base should be implemented, streamlining revenue or rationalising spending. 

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BY AKUL THAPAK

TEAM GEOSTRATA

info@thegeostrata.com