Ukraine’s president Volodymyr Zelensky received a much-needed financial boost on the eve of this week’s EBRD meetings with a pledge of more than $6.5bn in humanitarian aid from international donors.
While welcome, the offer from governments and multinational companies will only make a dent in a total bill for the conflict that the Kyiv School of Economics last week estimated will be as much as $564bn-$600bn.
Its latest methodical analysis includes the costs of physical destruction of $92bn of infrastructure including damage to 33,700 homes ($30.0bn), 23,800km of roads ($29.8bn), and almost 200 industrial units ($10.0bn).
But the vast majority of the bill comes from impacts of the collapse in economic activity, the freeze on inward investment, the flight of workers as part of the migration of 5m Ukrainians and additional defence and social support costs.
It is no surprise that Zelensky welcomed the $6.5bn package with a call for a “modern analogue of the Marshall Plan for Ukraine” — a reference to the US initiative of 1948 to provide foreign aid to Western Europe in the wake of the Second World War.
It is clear that Ukraine will need an influx of capital both during and after the conflict. According to Oxford Economics, the budget deficit is expected to hit around $5bn-$7bn a month during the acute phase of the war.
Governments, charities, agencies and financial institutions have all unveiled packages designed to help those affected by the conflict. The International Monetary Fund provided emergency assistance of $1.4bn via a rapid financing instrument in March, agreed less than two weeks after the invasion.
Last month the Fund, which estimates Ukraine will need $5bn a month just to keep the government and economy going, established an “administered account” for Ukraine to provide donors with a secure vehicle to direct financial assistance.
Across 19th Street in Washington DC, the World Bank Group — which estimates Ukrainian economic output will almost halve this year — has commited a $3bn package of support, of which it has so far mobilised $925m.
Europe’s IFIs have also stepped up. The EBRD is implementing a €2bn “resilience package” to support Ukraine and help countries directly affected in the surrounding region.
Given its mandate to support private sector development, funding is being made available to support Ukrainian companies through deferred loans, liquidity support, and trade finance. Where possible, businesses will be helped to relocate so their work can continue.
Meanwhile, the European Investment Bank has approved €668m in immediate financial assistance.
Individual EBRD shareholders have also pitched in. The UK has provided £220m in funding including £120m of humanitarian aid, while France has allocated €100m and Canada $145m. The US Congress has approved $13.6bn to support Ukraine split roughly equally between support for refugees and military assistance
But at some point, agencies will have to look beyond the immediate crisis and help fund the reconstruction of Ukraine. The EIB is looking at ways to accelerate the delivery of an additional €1.3bn of investment to cover critical infrastructure in transport, energy, urban development and digital technology.