EBRD Achieves €3 Billion Investment Target to Support Ukraine Amidst Russian Conflict

EBRD Achieves €3 Billion Investment Target to Support Ukraine Amidst Russian Conflict

(IN BRIEF) The European Bank for Reconstruction and Development (EBRD) has successfully met its goal of deploying €3 billion in financing to Ukraine’s real economy in 2022-23 to mitigate the effects of the ongoing conflict with Russia. The investment focuses on critical areas such as energy security, infrastructure improvement, food security, trade support, and private sector assistance. The EBRD’s commitment to Ukraine includes exploring a capital increase of €3 to 5 billion to extend further support. While the financial challenge for reconstruction remains significant, the EBRD believes that cooperation among international partners and the private sector will be essential in achieving long-term economic recovery and sustainability. The EBRD has already initiated various projects to support Ukraine’s transition, from financing agribusiness to enhancing energy security and improving vital infrastructure. Additionally, the bank continues to assist Ukraine in its reform efforts, aimed at aligning with EU standards and regulations, fostering transparency in public procurement, and building institutional capacity for effective reconstruction financing.

(PRESS RELEASE) LONDON, 24-Oct-2023 — /EuropaWire/ — The European Bank for Reconstruction and Development (EBRD) has met its target of deploying €3 billion of financing in Ukraine’s real economy in 2022-23, to limit the impact of Russia’s war on the country since February 2022.

The Bank, Ukraine’s biggest institutional investor, was swift to pledge increased support following the Russian invasion, focusing on energy security, vital infrastructure, food security, trade and the private sector. Its investment programme, put together shortly after the war began, also supports Ukraine’s neighbours, which have been buffeted by the conflict on their doorstep.

“We are fully committed to continuing to support Ukraine, now and in the future. The EBRD remains a steadfast partner of the country and its people over the long term,” said EBRD President Odile Renaud-Basso. “Thanks to the generous backing of our donors and shareholders, our support for the real economy now will help keep Ukraine resilient, making the task of reconstruction easier in the future.”

“We are proud to have reached the target we set ourselves. But it does not mean the work stops here. The needs in Ukraine are huge, and we will continue to support the economy for as long as it takes during the conflict, in line with our current investment levels, which may increase further once there is peace,” said Matteo Patrone, EBRD Managing Director for Eastern Europe and the Caucasus.

To sustain support to Ukraine in wartime and in reconstruction, the EBRD’s Governors have agreed to work on a capital increase in the range of €3 to 5 billion by year-end to extend maximum support for Ukraine, which, if approved, could give the EBRD additional resources to invest.

When circumstances allow for full reconstruction, the financial challenge will be daunting – beyond the scope of any single institution. The latest international needs assessment, based on wartime damage in the first year of the war alone, suggests a cost of US$ 411 billion. The private sector’s role will be crucial in restoring the economy, and international partners will need to collaborate effectively to maximise their effectiveness.

One marker of growing collaboration was the deal with which the EBRD reached its immediate target: the signing a US$ 100 million loan for Ukraine’s agribusiness sector, to shore up food security. The EBRD loan was part of a €480 million financing package for leading grains, poultry and oilseeds producer MHP, in partnership with the International Finance Corporation and Development Finance Corporation.

This multi-stakeholder package was in the spirit of an agreement earlier this year between 19 development finance institutions working in Ukraine, including the EBRD – called the Ukraine Co-investment Platform – to provide a framework for collaboration when making co-investments in Ukraine, mainly in the private sector.

Supporting the private sector and supporting trade are two of the EBRD’s five investment themes in wartime Ukraine.

Through its Trade Facilitation Programme (TFP), senior credit loans and the much-needed Resilience and Livelihoods Guarantees, which partially cover the PFIs’ credit risks, the EBRD is enabling Ukrainian businesses to maintain their access to finance.

With these instruments, the Bank has since the start of the war supported close to €800 million of trade though TFP in addition to more than €700 million of new lending to municipalities and private companies operating in agribusiness and other critical sectors of the Ukrainian economy.

Another theme is reinforcing the country’s energy security.  With the support of donors, the Bank has provided €520 million for the electricity transmission company Ukrenergo’s liquidity, linked to market reforms, and €300 million to the energy company Naftogaz, as part of a package of €500 million with donor support. In addition, at the Ukraine Recovery Conference in June, the Bank signed Memoranda of Understanding on providing €600 million of new financing for Ukrenergo, Naftogaz and Ukrhydroenergo, the country’s hydropower entity.

On vital infrastructure, the EBRD has signed loans totalling €250 million to Ukrainian Railways (Ukrzaliznytsya or UZ) to support its operations and upgrade the country’s railway links with the European Union to its west.

The EBRD is also improving road and rail supply routes in and out of Ukraine, to counter uncertainty over the main shipping routes through Black Sea ports such as Odesa, which have been affected by the war. The EBRD is providing €182 million to upgrade a section of road between Lviv in the western part of Ukraine and Rava-Ruska on the Polish border, in line with the European Solidarity Lanes initiative to boost road and rail access, in which the EBRD is also investing €300 million.

On food security, EBRD work has focussed on improving Ukraine’s grain export facilities, as well as making finance available throughout the food chain and maintaining livelihoods. For example, in July the EBRD provided €9.6 million to expand a rail terminal near the Polish border and build a grain transhipments complex for the agribusiness company Agrosem.

Beyond financing, the EBRD continues to support Ukraine’s reform drive – a crucial step not only to unlock further investments from the private sector, but crucially, to progress on Ukraine’s aspiration to become an EU member.

Through the Ukraine Reform Architecture and the Business Ombudsman, the Bank has been working with government and public bodies on issues related to EU integration and alignment with EU regulation, while the digital procurement platform ProZorro has improved the transparency and efficiency of public procurement.

The EBRD is also helping Ukraine prepare to effectively absorb the vast financing that reconstruction is expected to bring. Together with the European Investment Bank (EIB) and the World Bank, it is helping ministries and agencies build institutional capacity, and providing technical assistance in the State Agency for Restoration and Infrastructure Development of Ukraine to establish an effective Project Delivery Unit. A Memorandum of Intent signed on Friday between the EBRD, the World Bank, the EIB and the Council of Europe Development Bank streamlines and clarifies MDB procurement processes.

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SOURCE: EBRD