Ukraine’s reconstruction plan, with European and global funding, presented by the Commission

The foundations of a plan for the reconstruction of Ukraine after the war, with European and global funding, were presented today by the European Commission.

The war resulted in the collapse of Ukraine’s tax, export and other revenues, combined with large-scale misappropriation of assets and exports, including in the agricultural sector, along with a sharp drop in basic expenditures. The International Monetary Fund estimated Ukraine’s balance of payments deficit by June at about 14.3 billion euros ($ 15 billion).

“Addressing the significant short-term financial support of Ukraine for the continuation of basic services, addressing humanitarian needs and the restoration of the most basic damaged infrastructure will require a joint international effort, in which the EU will be ready to play its role. “The Commission emphasizes proposing additional macro-financial assistance to Ukraine in the form of EUR 9 billion in loans in 2022, complemented by support from other bilateral and multilateral international partners, including the G7. It will be paid in installments with long maturities and interest rates on favorable terms thanks to the guarantee from the Union budget. To make this possible, Member States will have to agree to make additional guarantees available.

The Commission emphasizes that “a significant global financial effort will be needed to rebuild the country after the damage of the war, in order to lay the foundations for a free and prosperous country, committed to European values, well integrated into the European and world economy, rely on its European course. ” As Russia continues its offensive, the overall needs for the reconstruction of Ukraine are not yet known, but it is important to design the basic building blocks of this international effort from now on. Support should have a medium to long term horizon.

The reconstruction effort should be directed by the Ukrainian authorities in close cooperation with the EU and other key partners, such as the G7 and G20, and other third countries, as well as with international financial institutions and international organizations. Partnerships between cities and regions of the EU and Ukraine will enrich and accelerate reconstruction.

An international coordination platform, the “Platform for the Reconstruction of Ukraine”, co-chaired by the Commission and the Ukrainian Government, will act as a general strategic governance body, responsible for approving a reconstruction plan to be developed and implemented by Ukraine, with administrative support and technical assistance from the EU. The platform will bring together partners and support organizations, including EU Member States, other bilateral and multilateral partners and international financial institutions. The Ukrainian Parliament and the European Parliament will participate as observers.

The “RebuildUkraine” reconstruction plan approved by the platform after a needs assessment will be the basis for the EU and other partners to identify the priority areas to be selected for funding and specific projects. The platform will coordinate funding sources and their destination to optimize their use, while also monitoring progress in project implementation.

To support the reconstruction plan, the Commission proposes to set up the “RebuildUkraine” mechanism, as the main legal instrument for EU support, combining grants and loans. It will be integrated into the EU budget, thus ensuring the transparency, accountability and sound financial management of this initiative, with a clear link to investment and reform. It will build on the EU’s experience under the Recovery and Resilience Mechanism, but will adapt to the unprecedented challenges of rebuilding Ukraine and accompanying it on its European course. The Mechanism itself will have a special governance structure that will ensure full accountability from Ukraine.

Particular emphasis will be placed on rule of law reforms and the fight against corruption, while investments made in line with EU climate and environmental policies and standards will help Ukraine emerge stronger and more resilient from its destruction. Russian invasion.

The unforeseen needs created by the war in Europe far exceed the means available in the current multiannual financial framework. Therefore, new sources of funding need to be identified.

The proposed architecture is flexible enough to cover these new sources of funding. The additional grants to be allocated to Ukraine could be financed either by additional contributions from Member States (and third countries, if they so wish) to the Union’s existing mechanism and programs, to benefit from the Union’s funding mechanisms and the proper use of the funds, either through a targeted review of the multiannual financial framework. These sources could also finance loans to Ukraine under the Facility. However, given the scale of the loans that may be required, the options include raising funds for loans on behalf of the EU or with national guarantees from the Member States.

Ursula von der Leyen, President of the European Commission, said: “The unprovoked and unjustified Russian invasion of Ukraine has caused horrific human suffering and mass destruction throughout the country, forcing millions of innocent Ukrainians to flee their homes. Ukraine can count on the full support of the EU. The EU will continue to provide short-term financial support to Ukraine to meet its needs and continue to provide basic services. “Reconstruction of a democratic and prosperous Ukraine. This means that investment will go hand in hand with reforms that will support Ukraine to follow its European path.”

Since the beginning of the Russian offensive, the EU has significantly strengthened its support, mobilizing around € 4.1 billion to support Ukraine’s overall economic, social and financial resilience in the form of macro-financial assistance, budget support, emergency aid. , crisis management and humanitarian aid. € 1.5 billion in military assistance has also been provided by the European Peace Facility, which will be used for repatriations to Member States for military support in kind to Ukraine, and an additional € 500 million is being mobilized. . euro.

Source: AMPE