With contributions from Nicole Zion, Glyn Cozart Chaney and Hannah Sarfati
On 21-22 June, the United Kingdom and Ukrainian governments hosted the Ukraine Recovery Conference 2023 (URC) in London. Initially launched in 2017 to advance reforms in Ukraine, the URC is now the central forum for international partners to advance commitments to the reconstruction and recovery of Ukraine following the Russian invasion. International companies, public markets, multilateral financial institutions, international organizations, governments and civil society organizations collectively pledged $60 billion for Ukraine in grants, loans, guarantees and other business commitments. Despite these significant commitments, the Conference demonstrated the importance of pushing forward on substantive reforms to transform promises into meaningful reconstruction and recovery.
During the Conference, several states announced new investment commitments for Ukraine’s recovery, including the United Kingdom ($3 billion in guarantees to unlock World Bank lending), the United States ($1.3 billion in aid) and the European Union ($54 billion between grants and loans). The additional funding comes following a March agreement between the International Monetary Fund and Ukraine on a $15.6 billion macroeconomic stability programme. Since 24 February 2022, the EU has approved approximately $41.4 billion, and the United States has provided about $63 billion in economic aid to Ukraine. The record pledges still fall far short of the estimated $100 billion in urgent reconstruction needs the Ukrainian Ministry of Finance has estimated for 2023. A complete reconstruction is estimated at more than $400 billion, more than twice the multi-year Marshall Plan to reconstruct Europe after World War II (about $167 billion today).
The Conference also saw a plethora of agreements signed between international financial institutions to promote recovery, rebuild and modernise Ukraine. In partnership with the European Bank for Reconstruction and Development, the G7 and European Development Finance Institutions launched a new Ukraine Investment Platform that will promote co-investments to maximise the impact of their support. The EU and the EIB Group launched the EU4Business Guarantee for Micro, Small and Medium-Sized Enterprises agreement to provide $43.5 million in EU guarantees, including $32.6 million for Ukraine that will unlock $407.6 million in loans for small and micro-entrepreneurs.
In addition, over 500 businesses from 42 countries and 21 economic sectors with a total market cap of more than $5.2 trillion signed the Ukraine Business Compact, which was launched at the Conference. This was an important but largely symbolic announcement – by signing on, companies committed to further investment in Ukraine without providing specific details or plans outlining those investments.
- The Ukrainian Government has a comprehensive and ambitious agenda for its long-term recovery that would position Ukraine as an international hub and key player in green energy, sustainable industry and IT. However, Ukraine and its allies are facing substantial war-related risks and challenges to coordinate and absorb the necessary investments. One major question with significant implications beyond Ukraine is how to pay for reconstruction—particularly if frozen Russian assets can be legally directed to Ukraine for this purpose. While the pledges and contributions to date are essential and significant, the number is far short of what will ultimately be needed.
- Ukraine’s recovery will depend on implementing a recovery process that prioritises continuing governance reforms and creating a business-friendly climate to attract investment. The Ukrainian Government committed to continuing the fight for democracy, transparency and the rule of law. International strategic and military support hinges on Ukraine’s capability to continue the war efforts, but recovery efforts will depend on Ukraine’s capacity to progress on essential domestic reforms simultaneously. The investment initiatives promoted by the Ukrainian Government will have to reflect international expectations and Ukraine’s commitments to implement the reconstruction projects transparently and efficiently.
- International institutions and allied governments must be committed to providing both long-term financial support as well as guidance and expertise to develop the investment framework. The need for compliance and oversight will have to be balanced against the imperative of ensuring responsiveness to shifting budgetary needs as the Ukrainian Government works to stabilise the country and address immediate military, infrastructure and humanitarian needs. This framework will need to leverage existing local strengths and embed international businesses into the local business and societal fabric.
- The private sector enthusiastically joined the Ukraine Business Compact, relying on promises from governments and international institutions to deliver fast-track access to foreign reinsurance capacity, but it needs clear support and guidelines on how to operate in Ukraine. The private sector is faced with the choice to make bold investment decisions and show commitment to supporting the Ukrainian war efforts, strategic priorities and society. International investors are looking for clear ways to assess and manage risks and roadmaps, which will allow them to align strategic investment priorities with those of Ukraine.