EU sets up Ukraine Trust Fund to support post-war reconstruction

The European Investment Bank (EIB) created a new fund with a capital of 400 million to support Ukraine's post-war reconstruction.

What is the problem?

According to a study conducted by the World Bank, United Nations, European Commission, and Ukraine, the cost of rebuilding Ukraine's economy following Russia's invasion over a year ago is now estimated at $411 billion. This amount, which is 2.6 times Ukraine's expected 2022 gross domestic product, covers the direct physical damage to infrastructure and buildings, as well as the impact on people's lives and livelihoods. The study also emphasizes the need to "build back better." The $411 billion estimate is higher than the previous estimate of $349 billion released in September. 

What is the solution?

ON FRIDAY, the EIB and the ministers of 16 EU countries signed agreements for the EIB EU for Ukraine Fund to support Ukraine's recovery and reconstruction. "Announced in spring 2023 as a part of a larger EU for Ukraine initiative, the EIB's EU4U Fund will help rapidly scale up support for Ukraine's most urgent infrastructure needs and sustain the economy," the statement said.

How does it work?

According to the EIB website, 16 of the 27 countries of the European Union have agreed to contribute money to the fund, which will provide grants and loans, as well as guarantees to Ukrainian banks and enterprises.

Initial pledges to the Fund from Belgium, France, Ireland, Italy, Latvia, Lithuania, Luxembourg, Poland, Slovakia, Spain, and the Netherlands total €383.3 million.

France and Italy became the leaders in contributions, each allocating €100 million, which can be directed to repairing extensive infrastructure and financing small and medium-sized enterprises or communal services.

The vice-president of the European Investment Bank noted that the fund's participants finance the stability of Ukraine and increase the strength of society and the Ukrainian economy.

"I am deeply grateful to the EU Member States that have already made pledges to the EIB EU for Ukraine Fund as well as to all those that expressed their support today," EIB President Werner Hoyer said. "These and future pledges will help Ukraine's economy and staunch resistance to the Russian invasion. The support expressed today will also help pave the way for the country's EU membership. We have rebuilt before, and in solidarity with Ukraine and our fellow EU and international partners, we will rebuild again!"

According to data, in 2022, the bank allocated €1.7 billion to Ukraine, particularly for schools, hospitals, social housing, kindergartens, and city transport.

"We count on the support of the EIB and its shareholders, the EU Member States, in restoring critical infrastructure," Ukrainian Prime Minister Denys Shmyhal said. "We are grateful to our partners for their quick and timely assistance during the war."

Background

The European Investment Bank (EIB) was established in 1957. Today, the shareholders of the EIB are 27 countries of the European Union. Since 2004, Ukraine has started cooperation with the European Investment Bank to create a regulatory and legal framework and attract its resources for implementing infrastructure, energy, environmental protection, and other investment projects.

As of July 1, 2023, the total financial resources provided to the EIB in Ukraine, both in the public and private sectors, amounts to more than €7.5 billion.