How do you rebuild a country ravaged by war? It’s not usually something the European Investment Bank has to do. But the EU bank’s big commitment to support Ukraine after the Russian invasion meant that the question had to be answered.
“We are usually focused on financial transactions, and we don’t develop strategies for helping countries during a war,” says Jean-Erik de Zagon, head of the Kyiv office for the European Investment Bank. “But we needed a plan for the huge amount of money we’re investing to reconstruct Ukraine.”
Working with the Boston Consulting Group, the European Investment Bank reviewed public documents on the war in Ukraine, especially findings from the international conference in Lugano, Switzerland, held in July 2022 to raise money for Ukraine’s recovery. More than 30 loan officers, engineers and other experts at the European Investment Bank contributed to the resulting report.
The final publication, released in February 2023 and called A Study on Potential Recovery Strategies for Ukraine, offers a blunt assessment of the country’s needs. Yearly gross domestic product in Ukraine is expected to shrink more than 30% because of the war with Russia, the report says. All economic sectors are struggling, but especially heavy industry, energy supply, and foreign trade.
The survival of Ukraine as a sovereign state is a prerequisite for future recovery and long-term modernization, the report says.
“If Ukraine can’t survive now, nothing will work,” de Zagon says. “They have to win the war, that is already difficult, and then we also have to keep people in Ukraine, keep the economy going.”
Here are some of the headline problems facing Ukraine:
- The war has caused six million people to leave their homes.
- There is a bottleneck in the process to review, approve and implement recovery and reconstruction loans and grants in Ukraine. Providing loans and technical assistance directly to the appropriate office, town, city or region, under creative investment plans to spread the risk, will be key to effectively rebuilding the country.
- Years of economic progress have been reversed. There has been a significant decrease in the monthly value of goods exported compared to before the war (down 62%).
- Small and medium-size companies have an average fall in revenue of nearly 80%. Nearly a third of these companies have relocated to safer areas and 66% can’t pay employees.
Solutions for Ukraine rebuilding
The Ukraine recovery report outlines the ways that the European Investment Bank and other organisations can help the country survive and recover.
1) Offer more help right now
“If we don’t do more work now during the crisis, we will be so far behind when we finally start that everything will be more difficult,” de Zagon says. “People in Ukraine need help now — food, medication, shelters, schools, hospitals.”
The so-call solidarity lanes that improve roads between Ukraine and border countries are playing a big role in keeping the economy alive and meeting basic needs.
2) Assist key areas of the country
Investment needs to be aimed where it can do the most work for the economic recovery. Ukraine’s needs far outstrip available funds, so international financial institutions must focus on the most important investments that can keep the economy functioning and lay the foundations for a long-term recovery.
“You have to make very difficult choices when deciding where to put the money,” de Zagon says. “Which projects do you need to finance first, which roads need to be repaired first, what infrastructure is needed today, what shelters should be built, what food do we need? And all this work needs to be sustainable and generate taxes, so the government can pay its bills.”
3) Closer cooperation with the European Union
The future of Ukraine is tied to integration with other democracies, especially those closest to the country. Improving cooperation and integration with the European Union is good for Ukraine and Europe, good for global trade, and good for the entire democratic world, the report says.
4) Let Ukraine lead the recovery
Ukraine must own the reconstruction effort, as this strengthens the country’s sovereignty and accountability. While international organizations need to advise and monitor the recovery process, Ukraine will have to become independent from international aid at some point after the war ends.
“We can come with our ideas and experience, but we should give the power to the government and the people,” de Zagon says. “We should let them have their way with planning the reconstruction.”
5) Work together
Hundreds of organizations are helping Ukraine. International financial institutions should find out how they can offer the most value by working together and then tightening these partnerships.
“There are so many needs and not enough resources, so we have to be sure we work together and coordinate,” says de Zagon, who meets weekly with Ukrainians, EU institutions and aid organisations around the world to make sure every possibility is being exploited to help Ukraine. “We can play like a team.”