In the runup to the Ukraine Recovery Conference in June 2023, the European Commission announced its Ukraine Facility, a four-year funding program for Ukraine worth €50 billion, in the form of grants and loans.
Below, we have prepared a brief summary of the Ukraine Facility along with what is known about the government’s plan for using these funds, with an emphasis on the areas to be targeted for investment.
The Ukraine Facility comprises three main pillars.
The first pillar consists of financial support. It should be based on the Ukraine Plan—the government’s plan for development of the economy for the next four years. It includes a program of necessary reforms and strategic sectors where funds and investments will be directed.
Initially, financing will be in the form of quarterly payments for the implementation of specific projects. €38 billion can be allocated for these purposes over four years.
The second pillar is to attract and mobilize public and private investments in support of the Ukraine Plan. For this purpose, €8 billion is to be allocated over four years in the form of guarantees (loans) or other financial instruments, but with the participation of businesses. Conditionally, €16 billion in business investments should account for €8 billion provided under guarantees.
At present five sectoral groups have already been created under the Ministry of Economy to work on this pillar. It’s important to note that five more groups are expected to be created.
The third pillar is in the form of technical assistance for strengthening institutional capacity and harmonization with EU legislation (EU acquis). The Commission has earmarked €2.5 billion for this purpose. Part of these funds will be used to pay off interest due on funds provided as loans, rather than grants.
All three pillars should be reflected in some way in the Ukraine Plan.
The Ukraine Plan is a comprehensive document that will serve as a roadmap for the country’s recovery and economic development of Ukraine over the next four years.
Initially, it will consist of six main blocks that will form a comprehensive vision for the development of the Ukrainian economy.
The blocks are set up as macro-financial reconstruction scenarios—main reforms and sectoral reforms (such as management of state-owned property and privatization, human capital, business climate, the financial sector) as well as development strategies for the key sectors of economy. In addition, the Ukraine Plan will include a block dedicated to increasing capacity to absorb investments, as well as complex topics such as European integration, digitalization, regional development and climate.
The Ukrainian government plans to complete preparation of the document by October this year.
For preparation of the Ukraine Plan in terms of economic development and investments, five sectoral groups were created under the Ministry of Economy of Ukraine: They include business representatives from the following sectors: agricultural, energy, IT and communications, transport and logistics, and manufacturing (engineering, critical materials).
Five more groups are planned to be created by late August. They will include business from such fields as construction, pharmaceuticals and medicine, culture and creative industries, processing and other types of industry.
That said, only representatives of the first five groups will be involved in preparing proposals for the Ukraine Plan.
It is important to recognize that this decision provides a benchmark for understanding what industries will be funded from the Ukraine Facility and what investments will be able to receive guarantees (loans) from the European Union.
We will keep you posted on the course of events as well as the final version of the Ukraine Plan, to ensure that you have a realistic understanding of the investment opportunities that will arise during implementation of the Ukraine Facility and other programs of international financial assistance for Ukraine.
