EBRD’s Unprecedented Support to Ukraine Amidst War: Investing in the Future
The European Bank for Reconstruction and Development (EBRD) takes a bold stance and continues to invest in Ukraine despite the ongoing war, providing crucial support to the country’s economy and infrastructure.
In the midst of Russia’s full-scale invasion of Ukraine, the European Bank for Reconstruction and Development (EBRD) made an extraordinary decision. While many institutions were hesitant to intervene in a war-torn country, the EBRD chose to continue investing in Ukraine, recognizing its responsibility to support the nation. With a commitment of 3.8 billion euros in 2022-2023, the bank’s investment has now reached 4 billion euros, demonstrating its unwavering dedication to Ukraine’s future. This article explores the EBRD’s role in supporting Ukraine during the war, the challenges faced, and the impact of its investments on the country’s public and private sectors.
Investing in Ukraine’s Private Sector
In 2023, the EBRD invested 1 billion euros in Ukraine’s private sector, accounting for 90% of its projects. The funds were directed towards trade finance and supporting small and medium-sized businesses through Ukrainian financial institutions. This investment aimed to stimulate economic growth and provide much-needed support to businesses struggling amidst the war.
EBRD’s Capital Increase for Long-Term Support
To ensure sustained support for Ukraine, the EBRD’s board approved a 4-billion-euro capital increase in December 2023. This marked only the third time in the bank’s history that such an increase was authorized. The additional capital brought the EBRD’s total to 34 billion euros, reinforcing its commitment to Ukraine’s long-term development. This decision was crucial, especially considering the challenges of securing funding from the U.S. Congress, which remains tied up.
Assessing the U.S. Congress Situation
While the EBRD acknowledges the importance of U.S. support for Ukraine, it emphasizes that its assistance is not solely dependent on funding from the U.S. The bank’s investments are primarily driven by the dynamics of Ukraine’s economy and the demand for financing. However, the EBRD hopes for quick support from the U.S., recognizing the significance of its military aid and the need for swift action in the war-torn country.
Challenges Faced in Investing During War
Investing in a country at war presents unique challenges for the EBRD. The bank had to define its risk appetite and assess the viability of projects amidst the ongoing conflict. The Ukrainian government’s ability to function and make decisions played a crucial role in the EBRD’s decision-making process. The bank also had to consider the potential impact of the war on the country’s structural reforms and governance changes.
Successes and Challenges in Reforms
The EBRD recognizes the successes achieved in Ukraine’s public sector reforms, particularly in macroeconomic stabilization and the state-owned enterprise (SOE) sector. The International Monetary Fund (IMF) has commended Ukraine’s ability to control its budget and stabilize its economy. The recent passage of the SOE reform in parliament after eight years of work is another significant accomplishment. However, challenges remain, including corruption and the implementation of reforms in the energy sector.
EBRD’s Practical Support for Ukraine
The EBRD provides practical support to Ukraine through various initiatives. It has a reform support team that works with the government to advance the reform agenda and facilitate EU accession. The bank also strengthens the reform delivery unit in the prime minister’s office, offering support for project and reconstruction preparation. Additionally, the EBRD collaborates with the State Agency for Reconstruction on anti-corruption measures, aiming to improve governance and procurement practices.
Mitigating Risks and Supporting Ukrainian Companies
The EBRD carefully selects the companies it invests in, conducting integrity checks and assessing financial viability. The bank does not work with oligarchs and ensures that the companies it supports adhere to high standards of quality and compliance with EU regulations. The recent protests by Polish farmers against Ukrainian poultry producers highlight the need for proper logistics and export facilitation, which the EBRD is actively working on.
Maintaining High Standards and Selectivity
The EBRD maintains consistent standards across all its investments in Ukraine. It does not adjust its expectations based on the country’s circumstances but remains stringent in its integrity checks and due diligence. While this may result in fewer investment opportunities, it ensures that the bank’s resources are allocated to companies that meet its criteria.
Conclusion:
The EBRD’s unwavering support for Ukraine during the war demonstrates its commitment to the country’s future. Despite the challenges posed by ongoing conflict, the bank continues to invest in Ukraine’s private sector, providing vital funding to businesses and stimulating economic growth. The EBRD’s capital increase further solidifies its long-term commitment to Ukraine. As the country navigates the complexities of war and reconstruction, the EBRD’s support and ongoing reforms are crucial in ensuring a stable and prosperous future for Ukraine.