Reconstruction of Ukraine after the war: What should be done now
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Despite the fact that the war in Ukraine continues, the financial world is actively discussing the possibilities for rebuilding the country. In June, as part of the Ukraine Recovery Conference 2023, the Ukrainian Government, business and international partners of Ukraine presented a strategic vision of reconstruction, including the role of the private sector.
Ukraine’s needs for reconstruction and recovery are estimated at an unprecedented 411 billion US dollars.
At the same time, in 2023, Ukraine urgently needs at least 14 billion dollars for projects, in particular for the restoration of energy, housing, critical and social infrastructure, basic services for the most vulnerable sections of the population, demining.
It is obvious that the need for financing currently significantly exceeds the capacity of the available financing sources for Ukraine. Accordingly, it is necessary to set priorities carefully and strategically – what is the priority for Ukraine in the long term?
Economy or people
According to various estimates, from 4 to 7 million Ukrainians are abroad.
According to the Ministry of Economy, over the next decade, an additional 4.5 million people need to be attracted to the Ukrainian labor market. Without this, it will be extremely difficult to ensure the growth of the national economy, at least within the minimum required 7% per year.
According to the Research Center for Economic Recovery, if half of the 5 million Ukrainians currently abroad do not return, Ukraine’s GDP will lose $113 billion in 10 years.
It is obvious that for economic recovery and growth, Ukraine must first return its people home. The prerequisites for this are:
- 1.Security: victory and convincing guarantees of security in the future.
- 2.Dwelling. Construction or restoration of damaged housing (need for financing – 69 billion US dollars).
- 3.Work. Economic incentives for creating new and expanding existing businesses.
Sources of reconstruction funding
There are three sources of funding for Ukrainian reconstruction, which Ukraine is currently developing with international partners: international financial organizations (IFIs), private funds, frozen assets of the Russian Federation.
Frozen assets of the Russian Federation. According to various estimates, it is about 300 billion US dollars of assets of the Russian Federation, which are located on the territory of Ukraine’s partner states and can be transferred to Ukraine to finance reconstruction.
Governments are working on defining an effective mechanism for implementing such a transfer. It is impossible to determine the time prospects of the availability of this source of financing today.
Private capital. Private capital is showing interest in the possibilities offered by the reconstruction of Ukraine. Various financing instruments are being developed, in particular blended finance – a combination of various sources of financing – trust funds, investors, patrons for the mobilization of private capital flows for restoration projects.
Private capital is expected to become a significant financial player when it can insure its war risks, i.e. immediately after the war.
International financial organizations. Financial resources provided by international financial organizations remain almost the only source of financing reconstruction projects available to Ukraine now, in particular, urgent needs – which are of primary importance for the return of Ukrainians home – such as the restoration of energy or logistics infrastructure.
The European Investment Bank, the European Bank for Reconstruction and Development and the Financial Development Corporation of the USA, MFI and IFC demonstrate the greatest determination in supporting the private sector. These international financial institutions are taking steps to launch programs and products that will support Ukraine today and during the reconstruction period.
In addition, some MFIs already have tools on how they will do this and approved limits for this year.
EBRD is one of the largest institutional investors in Ukraine. As of May 1, 2023, the total volume of financing allocated by the Bank of Ukraine within the framework of 532 projects is 18.1 billion euros.
The World Bank has mobilized more than $18 billion in emergency financing, including donor commitments and guarantees, to help overcome the devastating effects of the war on the people of Ukraine and its economy.
More than USD 16.4 billion of this funding has already reached Ukraine. Aid from the International Monetary Fund (IMF) is a significant support.
The role and capabilities of Ukreximbank
Today, Ukreximbank is the only financial agent of the Government of Ukraine for the implementation of programs of international financial organizations and the Government of Ukraine.
The bank has strong competence in attracting funds and forming financial products, in particular long-term loans, in cooperation with international financial organizations.
Today, Ukrexim has more than 400 million US dollars under active MFI programs, which are combined with the state program 5-7-9, for financing businesses and communities.
For clients of the private and municipal sectors, Ukreximbank helps:
- Assess the compliance of the project requiring financing with the requirements of the MFI;
- Prepare a package of credit documents;
- Monitor the progress of project implementation;
- Report on the project in the established MFI format.
Ukreximbank is the largest creditor of the corporate sector – 23 billion hryvnias for the military year 2022. The prosperity and restoration of Ukraine depends on whether the urgent projects for the return of our citizens will be implemented today.
State Ukreximbank, Ukrainian business, communities and municipalities can do this.
Let’s keep the financial front.
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