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How much will it cost to rebuild Ukraine?

Rebuilding Ukraine, should it win the war against Russia, could cost up to $1trn, but who will provide the money?

By Sebastian Shehadi and Viola Caon

In a recent speech to the European Council, Ukrainian minister of finance Sergii Marchenko said that the “heaviest blow” of the Russian invasion of his country had been withstood, militarily speaking, but that the situation remained very difficult on an economic and financial front.

“The losses caused by the war are catastrophic. The Russcist occupiers continue to destroy not only military facilities, but also transport, energy and industrial infrastructure, which was built by generations of Ukrainians [and many of which] survived World War Two,” he added.

The economic toil on Ukraine

The war on Ukraine has half-decapitated the country’s economy, with many businesses suspending or abandoning their operations. According to Marchenko’s preliminary estimations, about 30% of companies have completely stopped their activities, while 45% have reduced production. 

Putting a price tag on Ukraine’s overall reconstruction cost remains difficult, not least since the war is not fully over (moving now to the eastern front).

“In the scenario in which all of Ukraine has been liberated and there is a state which is under Ukraine’s control, there might be a sort of Marshall Plan [like after World War Two] which is likely to be a $1trn programme,” says Daniel Bilak, former chief investment adviser to the prime minister of Ukraine. “Entire cities will have to be rebuilt and that is a big undertaking. Cities such as Mariupol and Kharkiv will need new residential buildings, business manufacturing facilities and so on.” 

Bilak’s estimate is higher than the official figure put out by the Ukrainian government: $565bn

Meanwhile, researchers from the Centre for Economic Policy Research think it will cost between $220bn and $540bn (the upper figure being more than three times Ukraine’s pre-war GDP).

After the war…

In his speech, Marchenko tried to contextualise some of the overall estimates by explaining that, in the first month of the war, there was $119bn-worth of damage done to Ukraine’s infrastructure alone. According to the Kyiv School of Economics, the value of destroyed housing currently stands at about $29bn.

Marchenko added that the war has unfolded in areas that amount to almost 75% of Ukraine’s GDP, and where, before the invasion, almost 10 million people were employed, 64% of Ukraine’s total employed population.

“We trust in your support not only during the war time, but also to help us rebuild our country after our victory,” said Marchenko.

This is why Ukraine is calling on its international partners to provide further financial support through grants as well as loans, not least through the World Bank Multi-Donor Trust Fund, which is among the most rapid, targeted and secure mechanisms to channel grants from donors to Ukraine.

Ukraine is also hoping that the EU will set up a separate multi-year facility to support the country both in the loan and grant formats, or if it proves easier, make Ukraine eligible for the funds from the Next Generation EU facility.

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