Rebuilding Ukraine, with an estimated cost of around $1 trillion, will be an unprecedented undertaking given the massive scale and uncertain environment. Although the reconstruction details are still being determined, the main international donors are likely to be the EU and its Member States, international financial institutions, and the United States. And while large-scale efforts are unlikely to start across all of Ukraine until after a peace agreement is reached, limited recovery projects have already been launched and may be expanded.
Marshall Plan Times Ten
Russia’s war of aggression has generated enormous economic damage in Ukraine, not to mention over 140,000 civilian and military casualties. According to the latest World Bank estimates, the overall damage in Ukraine resulting from the war is already around $425 billion. This consisted of $135 billion in direct damage and $290 billion in disruptions to economic flows and production.
Longer-term, Ukraine foresees around $1 trillion necessary for post-war reconstruction over a ten-year period. Depending on the depth and destruction of the war, however, even this colossal estimate may increase over time. By comparison, the oft-invoked example of the Marshall Plan—America’s historic reconstruction of Western Europe after World War II—was around $100 billion in current dollars spread over four years and across seventeen European countries. Ukraine may require that times ten over ten years and could become the world’s largest reconstruction effort since 1945.
To help meet this need, the international community has begun organizing donors’ conferences of governments and companies interested in supporting and rebuilding Ukraine’s economy. In July 2022, the Ukraine Recovery Conference was held in Lugano, Switzerland, with the participation of five heads of state and government and 58 international delegations (representatives of governments and international organizations). In October 2022, Germany and the European Commission co-hosted in Berlin a conference of experts to develop ideas for Ukraine’s reconstruction.
On June 21-22, 2023, the Ukraine Recovery Conference convened in London with officials from 61 countries, leaders of 33 international organizations, and numerous companies. At the conference, the European Commission unveiled a €50 billion proposal for Ukraine (in grants and loans over three years) as part of its EU budget review, which the Council and Parliament will now need to discuss and decide upon. The EU along with several international financial institutions signed agreements worth over €800 million to mobilize private investment for Ukraine. And over 500 firms signed the Ukraine Business Compact committing to supporting Ukraine’s reconstruction. The next conference will convene again in Berlin in 2024.
In January 2023, the Multi-agency Donor Coordination Platform was established by the EU, G7 countries, and international financial institutions to support Ukraine’s repair, recovery and reconstruction process. The Platform aims to facilitate coordination among international donors to ensure coherence and transparency. Some countries, such as the UK and France, have also appointed special envoys for Ukraine’s reconstruction.
Multiple International Donors
Even before Russia’s full-scale invasion of Ukraine in February 2022, there was already a wide range of international assistance programs in Ukraine—by the European Commission, the European Bank for Reconstruction and Development, the IMF, the World Bank, the United States, as well as individual European governments—each of which had its own conditions and procurement mechanisms.
- Between 2014 and 2021, the EU provided significant financial and technical assistance to Ukraine: €1.7 billion in grants under the European Neighbourhood Instrument; €5.6 billion under five macro-financial assistance programs in the form of loans; €194 million in humanitarian aid; and €355 million from foreign policy instruments.
- Similarly, the European Bank for Reconstruction & Development (EBRD) facilitated about $16 billion in investments across Ukraine.
- In 2015, the IMF approved a four-year loan of $17.5 billion to Ukraine under the Extended Fund Facility, which allows for longer program and repayment periods.
- Since 2014, the World Bank has been a lead contributor for providing financial support to Ukraine, with annual support of around $1 billion through various loans and guarantees.
- The United States issued three separate $1 billion sovereign loan guarantees to Ukraine between 2014 and 2016, as well as well provided over $2 billion in development assistance since 2014. The Export-Import Bank of the United States intends to make available up to $3 billion to facilitate procurement of U.S. goods and services for projects in Ukraine, and the U.S. International Development Finance Corporation has investments in Ukraine of around $800 million across over a dozen projects.
Ukraine’s recovery efforts have thus far focused on small-scale repair projects led by the United Nations as part of its humanitarian assistance. For instance, in March 2023, the UN Development Programme (UNDP) committed to an $18 million restoration project on 18 multi-storied apartment buildings in the Kyiv Oblast. UNDP has also signed a $15 million agreement with the EU to repair more than 50 schools across Ukraine, as well as a €5 million agreement with the German government to repair 12 schools. It is possible that other similar initiatives will follow, given UNDP’s estimates that around 1.4 million houses and 3,000 educational institutions have been damaged or destroyed in Ukraine.
More broadly, the UN has already implemented around $1 billion of recovery and development programs in line with the Ukrainian government’s priorities, driven by 24 UN entities and over 3,700 personnel.
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Promoting a strong and fast economic recovery in Ukraine will be a strategic geopolitical priority for the international community. Neither Ukraine nor the West can afford to see Ukraine checkmate Russia militarily, but then lose the peace with a stagnant economic recovery. And in turn, for effective reconstruction to take place, it will be vital to foster significant private investment in recovery, which will require economic reform, programs to mitigate investment risk and effective initiatives to curb corruption.
The team at Covington is closely monitoring developments and opportunities in light of the firm’s extensive work on Ukraine matters and our expertise on the elements that will make up a successful economic recovery strategy.
Lasse Luecke of Covington & Burling LLP contributed to the preparation of this article.