Reconstructing Ukraine: The Path Forward

Panelists discuss global financial efforts to support the reconstruction of Ukraine and help rebuild the country’s infrastructure and economy following Russia’s military aggression.

This meeting is part of the Council Special Initiative on Securing Ukraine's Future.

This event is part of the Wachenheim Program on Peace and Security which is made possible by the generous support of the Sue and Ed Wachenheim Foundation.

CREBO-REDIKER: So good morning, everybody. And thank you for joining us today on this incredibly important topic, on an important day where we have meetings in London taking place between the U.S., and Ukraine, and European partners. So against that backdrop, welcome to CFR. This is “Reconstructing Ukraine: The Path Forward.” And I think, regardless of what happens in the meetings today in London, one thing is quite clear, that Europe will be increasingly taking on the burden of supporting Ukraine, and particularly for reconstruction—both the ongoing during the war, and also if there is a peace then taking the lead on the reconstruction afterwards.

I’d like to introduce our panel today. We have minister Sergii Marchenko, minister of finance from Ukraine. We have president of the EIB, Nadia Calviño. We have president of the EBRD, Odile Renaud-Basso. And we have Carlo Monticelli here joining us from the Council of Europe Development Bank. And he is the governor.

So this is an on-the-record portion this morning right now. The first thirty minutes we’ll have a conversation, and then once we go to the Q&A from the audience, the second thirty minutes, we’re going to be doing that on a non—not for attribution basis. Meaning that you can use the information, but you cannot cite the source.

So with that, I would like to ask the minister if you can give us a sense of how the meetings, the spring meetings, at the IMF and World Bank have gone so far. We have—you’ve had very high praise from the IMF in terms of delivering on targets, during a time of exceptional pressure. And so congratulations. I’ve also personally heard a lot of, like, very, very positive feedback on the working relationship with the Fund and the Bank. So tell me, as you have increasing pressure on—strikes on ports and infrastructure, energy, what do you think are the most pressing reconstruction needs right now? And how do you see the international financial community, the public and private institutions, coming together to support those reconstruction efforts?

MARCHENKO: Thank you very much. Good morning, ladies and gentlemen. I’m pleased to be here.

Well, it’s another spring meeting, another opportunity for us to discuss Ukraine’s case, the reality in which we are with. You know, thank you very much for praising us of a successful review of IMF. We already accomplished seventh review, and now approach into the eighth review. Well, it’s—traditionally, it’s not an easy endeavor. Every time is a challenge. Every time a new issue can be necessary to resolve. But we hope that our persistence, our determination to conduct necessary reforms to meet our targets, is the testimony of our awareness and unity and professionalism.

Again, we are trying to survive during this war. So it’s natural things. We try to implement that kind of reforms which traditionally Ukrainian government were reluctant to implement. But right now, we see a lot of opportunity to press forward with our reform agenda. If you’re talking about reconstruction, well, it’s traditionally very, very natural point of discussion, let me say. I remember it started from late 2022, now we discuss it in 2025. It’s still debated the resources, we still discussed the possibilities, instruments, how we can do it for particular spheres of interest.

To be honest with you, the priorities of government of Ukraine is still the same. It’s energy sphere which were damaged seriously during last years. Restoration of energy is priority number one. Second is housing, because it’s our natural desire to provide necessary accommodation for people who are living in Ukraine, who eager to be back in Ukraine. Critical infrastructure, another point of reconstruction area, as well as business climate and investment of private businesses, another topic.

You know that, together with our partners, we created Ukraine’s donor platform. And last month we held thirteenth meeting of this platform. It’s very reliable tool, which gather together all participants. And it’s very helpful because it—all necessary bureaucracy organized under this platform. And it help us to track records what we committed to do, follow up, created some kind of trust and accountability for all partners. And, you know, my colleagues, the president, chairmans of key multi-development banks are all here. Probably this is a key possible elements of our infrastructure in reconstruction of Ukraine. You know, without these banks it’s impossible to do any reconstruction efforts.

And probably my final point, if you’re talking about reconstruction I want to—you to know one—just one figure. Our needs, which were assessed by World Bank for this year—critical needs for reconstruction—is $17 billion U.S. Available resources for this year is a little bit more than seven (billion dollars). So the gap is practically nine billion (dollars). I’m not talking about huge reconstruction and damages. You’re well aware it’s up to 500 billion (dollars). But I’m talking about critical needs. And that’s why it’s a key question, probably, to discuss, how to multiply the efforts of our development banks, how to bring necessary capital, how to help us to accommodate these resources, because we also feel some kind of necessity to strengthen our capacity to be able to use this resource. So let me pause here.

CREBO-REDIKER: Well, that was a great way to just start. And I wanted to dig down a little bit in the multi-platform donor conference that you just had a couple of weeks ago to plan, I believe, for the big Rome forum that will happen this July. But if I can turn next to the President of the European Investment Bank Nadia Calviño, and ask a little bit about how you’ve managed to support Ukraine. What, if any, new developments have come out of these spring meetings? And for those who are not familiar with the European Investment Bank, it is one of the largest multilateral investment banks in the world. It has a balance sheet in excess of 550 billion euros. So I think—and they focus a lot on project finance, on crowding in private capital, all the things that I think Ukraine really needs right now. So, please, I’d love to hear your thoughts.

Calviño: Yes. Thank you very much. It’s a—I was going to say it’s a pleasure, but it isn’t. Isn’t it tragic that three years on, we continue to have these meetings? And at the same time, I think we all feel quite proud that three years on, we continue to be strongly supporting Ukraine. And, Sergii. I was thinking as you were speaking of the first meetings we had here, actually, during the spring meetings already, we organized the first—

MARCHENKO: Three years ago.

Calviño: Three years ago. We had the first Friends of Ukraine meeting. You were there also, Odile. And I was in a different capacity, as vice president of Spain and chair of the IMFC. And already there we saw a very strong unity and determination to support Ukraine. And one of the things that have impressed me most are two elements that continue to be there.

One is the unanimity and the unity. And I’m sure that this week, as we will gather with these Friends of Ukraine again, we will hear the same relentless, unwavering support to Ukraine, coming from a full room, you know, representing a very significant number of countries and institutions. And the second thing that I find impressing is the resilience of the country, and the outstanding job that you are doing and that the government is doing in trying to manage a country in as normal as possible a manner, in these absolutely abnormal and terrible circumstances.

And the second, and to come to your question, the European Investment Bank is probably the main investment partner to Ukraine. We work very closely with the EBRD and with the other multilateral partners in providing the necessary finance to rebuild the bridges, and the trains, and the energy infrastructures, to build bunkers to protect the schools and the kindergartens, to look into emergency number 112, the European emergency number, so that we can bring together all the emergency services at the municipal level, water infrastructures, district heating. I want to mention all these examples because this is really the impact on the ground of the financing agreements.

Now, what’s going on and what’s new? I think that we’re managing to accelerate the deployment of these investments on the ground. Only one month ago the European Commission granted, or gave, the European Investment Bank a 2 billion guarantee, so that we could proceed with this new Ukraine facility. And only two weeks later I was signing with Prime Minister Shmyhal the first mobilization of resources to finance those investments on the ground.

So my final comment I’d like to share is we will continue to support Ukraine. We are becoming more efficient in that support. Today, we’re going to be signing, actually, a mutual reliance agreement with the European Bank for Reconstruction and Development, with the EBRD, precisely to ensure that we can rely on each other’s processes and reduce the bureaucracy and be faster in implementation on the ground. We are becoming more efficient. And I am extremely confident in the capacity of Ukraine to recover very, very fast once this war is over, because I have seen the resilience that they’re showing for these long and terrible three years.

CREBO-REDIKER: So I think that echoes what we all are very, you know, happy to hear and see, all of the resilience from Ukraine, because it’s been a terrible past three years. And we are admiring all of the resilience that you’re showing.

I’m going to ask President Odile Renaud-Basso, somebody who has been very deeply involved with Ukraine for many years. And EBRD has, since the fall of the Berlin Wall and the collapse of the Soviet Union, been the key enabler—private sector enabler of development in the whole of the Central and Eastern European region, and also has been, along with EIB, a key facilitator of EU accession. Can you give us, again, same question as I asked to Nadia. What are the updates from your from your time here at the IMF spring meetings? And maybe just the path forward from your perspective.

RENAUD-BASSO: So thank you very much. And, also, I’m very happy, in a way, to be here, because I think that it’s important to continue to express and to explain what we are doing in Ukraine, and how the country is doing, and so as to keep the momentum for support. And I think that’s very much needed. I’m also—I think the theme of the resilience is something which is absolutely striking. I’ve been traveling in Kyiv five years since—five times since the beginning of the war. Each time I’m struck to see how, despite, you know, the alarms, the bombing, and it’s been up and down, and more recently it was quite intense, how people manage, how business manage, how government manage. And everybody remains calm and keep going. You know, you keep the meetings ongoing to discuss what you need to discuss, even if you have alarms and real risk.

What we’ve been doing in these circumstances is really stepping up our investment. Because we used to do one billion investment a year in Ukraine, more or less, before the war. And since the war, we’ve invested more than 7.5 billion euro—dollars, 6.6 billion euros in the country. The majority of that, in the private sector. So 55 percent of that in the private sector, and 45 percent in the public sector. And what we’ve been trying to do is to, because the circumstances are evolving very quickly. I mean, you have needs depending on what has been destroyed. And so what we’ve been really trying to do is to help managing the emergency. And, for example, one big focus of us was the energy—has been energy sector, and it remains the energy sector. More than a third of our financing is in the energy sector because it’s a key enabler for the economy to keep going, for people to be able to continue to work, to get revenues to finance the government, the budget, and so forth.

And this has—we have taken a whole range of things we would not do in normal times that we’ve been doing in Ukraine, like financing gas import for Naftogaz to be able to have gas and storage—gas storage capacity. But also financing the reconstruction of electricity network, in Ukraine has been under attack for three years. So rebuilding, and building shelters, and so forth. But also developing new capacities with renewable. And now, for example, we are working on how to support the development of renewable, create a guaranteed capacity so as to ensure that investors will be paid back. And we are trying to set up this kind of platform in order to facilitate private investors to invest in renewable, and then have the insurance that they will be paid back and not—maybe not be too dependent on budget capacity.

So energy, but also, I mean, as you mentioned, private sector for us is absolutely key. And when you look a bit backward, what is amazing is after the big shock on the economy, minus 30 percent is the first year of the war, then there have been positive growth with three years—I mean, under 5 percent, a bit less last year, but we expect again an increase and a positive development this year. So this is very much related to the capacity of the private sector to continue to invest. We provided a lot of emergency, I mean, liquidity assistance for SMEs, or guarantees for the private sector to keep financing the SMEs.

But also you see new investment capacities. We finance—I mean a company doing pet food develop—and enhancing their capacity investing in Ukraine, or some companies developing activities outside Ukraine also to balance the risk and to be able to grow and sustain their activity in Ukraine. Private investors, private equity funds, building up a new pipeline of investment, including in tech. I mean, tech industry has been very—I mean flourish—not flourishing, but growing in a sustained manner. And I’m not going to talk about the military industry, drone capacity and so forth. But so there is a big, big resilience of the private sector.

And it’s true also from international investors, because what we see is that international investors that were already in Ukraine stayed there. Even if—I mean, if circumstances were challenging, they did not leave the country. They remained there. And we see some interest. So there is not a huge number of FDI projects, because in a war situation it’s not easy, but still you have some investors coming in. For renewable, we had German investors developing renewable in Ukraine. But also last year a very, I mean, big project in the telecom industry, landmark project we finance with IFC, which was a newcomer in the country. So really investing and showing confidence in the country.

So I think these are very important building blocks that will be key for stepping up for the full reconstruction, if and when there is the peace agreement. That will be very important to rely on all these. And I’m sure that in that circumstance then you will have also an inflow because of the potential of the country, in agribusiness, in tech industry, in manufacturing, in raw material, and so forth. So there is a lot of potential that will be—and having been able—and being able to keep the economy going, the bank to function, people to have their job and so forth, is absolutely key for the country to rebound bigger, in a more—I mean, in a more dynamic manner when the war is over.

CREBO-REDIKER: So I think that’s incredibly helpful to underscore that there is still private investment and, indeed, huge opportunities in the sectors that you mentioned. But at the same time, you’ve had a lot of—you’ve had a lot of displacement of people, of Ukrainians within Ukraine and also in Europe. And so I’d like to turn to Governor Carlo Monticelli to talk a little bit about what the Council of Europe Development Bank has been doing in that area, because I think you’ve played a very key role. So please go ahead.

MONTICELLI: Well, thank you. Thank you for having me. And I am the sort of, you know, new old kid of the block. I’m new, in the sense that the bank’s involvement in Ukraine only came after the brutal Russian invasion. But old because the bank is, after the World Bank, the oldest multilateral development bank in the world. It has a special role in the international financial architecture, if you will, because we are the only multilateral development bank which only focuses on social investment—schools, hospitals, social housing. And we have quite an important tradition of operation with postwar environment, in the Western Balkans.

So we have been bringing this expertise to the table. After the invasion, by the process of membership which took place in in record time, less than one year. While this process was taking place, we were supporting the Ukrainian people, just financing neighboring countries that were hosting, you know, displaced people. And after Ukraine became our full member in June 2023, we could start in earnest operating in the ground, just focusing on the health sector and, most importantly, in the housing sector. Both providing home to those who had completely lost it because of the war, and then also supporting communities of internally displaced people in Ukraine, with operations that are now being ramped up.

What I am really keen to flag is that the tragedy of, you know, the war is, at the same time, had the silver lining of acting as a very powerful catalyst for the coordination of the various IFIs on the ground, with enhancement of collaboration, exchange of information, but also signing mutual reliance agreements, just to make our impact more effective and efficient.

CREBO-REDIKER: Thank you so much.

Minister Marchenko, one of the issues, I guess it was both an opportunity but also a challenge, was this coordination between all of the donor communities—the bilateral, the multilateral. You had countries from all over the world wanting to support in different ways. You had NGOs and philanthropic institutions. The coordination has actually been quite effective, from the feedback that I’ve heard. Are you—are you—is that reflected in your perspective? Are you seeing good coordination that there’s not undue pressure on your ministry, for example, to answer to many, many, many, well meaning, but sometimes challenging, supporters?

MARCHENKO: Well, thank you very much. No. It’s presumed that minister of finance traditionally are not happy. It’s our traditional approach. That’s why, if you ask me if I’m happy with coordination, not—we are not happy. (Laughter.) But I believe that there are a lot of possible room for improvements. And I already mentioned that we have this Ukraine donor platform. Well, it’s a very well-organized instrument, where all our partners, donors, can vocally and loudly make their sentences and expectations related coordination, et cetera. And I see a lot of progress we achieved during the work on the platform.

So, for example, we introduced public health management system, which envisages streamlining all existing projects into one specific facility, single project pipeline tool, which helpful for all donors, which helpful for local communities, for government of Ukraine, because it’s not—it’s very sound system. You know you can put here all necessary documentation, information about projects, about necessary repair and construction. And it’s very helpful, because it help us to estimate. It helped us to—really transparently to show what we are eager to support as a government of Ukraine. And probably it’s also helpful for our partners, development banks, because it’s—for them it’s a very reliable instrument which helps them to understand what are the key governmental priorities?

Because, you know, we can talk about energy, we can talk about housing, but if we haven’t included this project into our pipeline, it means there is just words. If you already included this project, and we as a government of Ukraine are able to put some amount from our budget to show this is really real of our interest, it can work. So I just explained that it’s a constant process. Of course, we had a lot done, a lot of mistakes. We still trying to collaborate how to—how to weight these interests—central governmental interests, local governmental—because it’s not an easy process. Sometimes, you know, it’s still debated. Specifically during the war it’s, like, different kind of discussions, but it’s still ongoing process. But, well, probably, to be honest, we are more happy than not happy in coordination. But it’s a lot of opportunities to improve it.

CREBO-REDIKER: So and, of course, all of these institutions have been vital in providing capacity building on the ground for the pipeline of projects, because with so many people displaced, and an active war going on, it’s very hard to get the right resources trained up and implementing a lot of the projects that you have in that pipeline.

(Note: Q&A session not transcribed.)

(END)

This is an uncorrected transcript.