INTERVIEW

Reconstruction of Ukraine: "The immediate needs are estimated at 9 billion dollars"

Glass factory destroyed by a Russian strike in Merefa, Kharkiv region, August 1, 2022. REUTERS - STRINGER

Text by: Bruno Faure Follow

7 mins

As war rages in Ukraine and Europeans pledge to help the country, funding for reconstruction becomes a priority.

Alain Pilloux, vice-president of the European Bank for Reconstruction and Development (EBRD), which operates in 38 countries, details the emergencies and reveals the mechanisms which should make it possible to respond to the current difficulties.

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RFI: The Ukrainian economy has collapsed for a year.

What has the EBRD done to help it?

Alain Pilloux:

We injected 1.7 billion euros into Ukraine last year in various sectors.

Firstly to ensure the continuity of essential public services such as gas, electricity or the railways, and to keep the private sector afloat, in particular sectors which export to Ukraine such as agri-food. 

What are the priority needs today? 

First, there is a need to finance the budget deficit, which this year will reach approximately 40 billion dollars.

It's on the right track, because funding has now become predictable.

It is provided essentially by the European Union and by the G7, mainly the United States, in roughly comparable proportions.

There are of course urgent needs for repair, replacement of the infrastructures affected by the bombardments.

Energy is a priority, especially transmission infrastructure, substations, high voltage infrastructure essential to ensure the supply of electricity, but also access to urban heating, access to water.

It is absolutely vital.

Beyond the energy sector, there are obviously extremely important and urgent needs in the areas of transport, housing and social infrastructure.

Later, perhaps, not in the short term, we will have to deal with mine clearance.

The World Bank has estimated that demining needs in Ukraine amount to more than 70 billion dollars.

It is a huge need.

35% of Ukrainian territory is currently mined. 

► To read also: Rebuilding Ukraine: "The temptation of excessive standardization is very strong"

Some estimate the potential needs at 1,000 billion dollars, with a war that lasts and therefore needs that increase day by day? 

We must always be wary of announcement effects and figures.

The World Bank last year estimated the needs at 350 billion dollars.

This study is now corrected.

The number will probably be higher.

My personal estimate will be between 400 and 500 billion dollars.

But what matters perhaps more is the short term, because we are always at war.

The immediate needs are estimated at around 9 billion dollars by the Ukrainian government.

The money is not quite there, but it is partly there and this need will be met by the various partners.

What is very important is that the money goes where it is needed, that people's lives improve.

At the EBRD and other international institutions, we are working to speed up cash transfers to Ukraine. 

From a financial point of view, what is the best process?

By loans or by donations?

Both, because the international community has lent a lot of money to Ukraine and also to Ukrainian state enterprises.

But there is a limit to loan absorption.

I don't know exactly when it will be reached, but in 2023, we need a better balance between loans and grants.

For example, we made a loan of 3 million euros to Naftogaz to buy gas, but in addition to this loan, Norway gave 2 million.

This is a good example of the balance between loans and grants and this should increase this year. 

European Council President Charles Michel has raised the idea of ​​using Russia's frozen funds to generate revenue for Ukraine.

Do you think this is feasible and desirable? 

This is a subject of great importance and, of course, we have to work on it.

This is an extraordinarily complex subject, an army of jurists has been assembled by President Zelensky to work on it.

It will take time, but we must absolutely continue to mobilize funding for Ukraine.

If we succeed in mobilizing the frozen funds in the future, that will be very good, but we must not at the same time distract us from short-term action. 

There are many potential donors.

Who will coordinate? 

It is also a very important subject.

I happen to chair the international operational group for the coordination of financial assistance to Ukraine.

It includes all the G7 countries, Ukraine and international organizations such as the IMF, the World Bank, the IFC and, in Europe, the EIB and the Council of Europe Development Bank.

In this group, we discuss short-term responses in the electricity sector or in the infrastructure sector and then we see who can do what, how the roles can be divided.

In addition, there is now a political level of coordination which has just met and where the G7 is taking the lead. 

Who are your partners in the financial sector in Ukraine? 

We work with the majority of local Ukrainian banks and with foreign banks present in Ukraine.

They have never closed their branches, except in areas occupied by the Russian army.

Through them, we provide liquidity to support SMEs and other Ukrainian businesses. 

Foreign investors are going to want a return on investment.

How to guarantee it in a context of war which could last?

Recently, we supported a major Polish investor who reopened a ceramic production plant in the west of the country.

We have supported a company in the steel sector and I hope that we will soon support investments in the telecommunications sector.

As far as investors are concerned, they will need support, whether local or foreign.

A war and conflict risk hedging system will be needed.

We are working on it. 

One of the concerns of investors is the level of corruption which is often an obstacle to reconstruction in countries at war.

Ukraine is not exempt from this difficulty. 

The good news is that

, coordinated and hopefully effective actions are being taken in Ukraine.

With the IMF, the European Union, the G7, we also work a lot on these issues of the rule of law and the fight against corruption.

In the current IMF program and in the financial assistance of the European Union, there are conditions on the fight against corruption.

It will determine the amount, volume and speed of international aid. 

Will these projects in Ukraine be to the detriment of other projects in other countries of the world? 

Absolutely not.

The situation in Ukraine has increased the demand for our financing in Central Europe, in the Baltic countries, in the Balkans, in Romania, in Bulgaria.

In 2021, we had invested 4 billion euros in this region.

Last year we invested 5 billion.

Same thing in North Africa and the Middle East, where we added a billion euros.

A choice linked to the geopolitical situation in Ukraine and, as far as Africa and the Middle East are concerned, to the increase in food prices and supply difficulties. 

Precisely, you are already present in the Maghreb.

Are you considering projects in sub-Saharan Africa? 

We are indeed present in Morocco, Tunisia, but also in Egypt, Jordan, Lebanon and the Palestinian territories.

Algeria could become a country of operation.

The second thing is that at our General Assembly which will be held in May in Samarkand in Uzbekistan, our shareholders will ask themselves the question of a possible expansion of the EBRD, in Iraq and in certain countries of sub-Saharan Africa. the list of which has not yet been definitively established.

This expansion will in any case be cautious and limited. 

► Also to listen: DECRYPTION - Ukraine: spend the winter and rebuild

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