The International Finance Corporation (IFC) has unveiled a $1.18bn initiative to accelerate private investment into the reconstruction of Ukraine, even as Russia’s war against the country continues and the government’s reconstruction chief announced his resignation.

The package, announced on June 11 at the Ukraine Recovery Conference in Berlin, includes financing a 350 megawatt (MW) wind power project, creation of a national telecoms champion, and guarantees to unlock €1bn in property-related investment. 

The news comes as foreign direct investment (FDI) into the country bounces back, with foreign capital expenditure hitting $5.5bn last year, the third-highest level on record according to fDi Markets.

The development bank’s reconstruction efforts follow $1.4bn in working capital it has pumped into Ukrainian firms’ since the war began, having the intention to focus on rebuilding once the conflict subsided.

“However, we never expected this war was going to last so long, and we thought that we could actually start with the reconstruction earlier,” Alfonso García Mora, IFC vice president for Europe, Latin America and the Caribbean, tells fDi. “That’s why we have shifted our focus…to the asset-intensive sectors of the economy that were very damaged because of the war.”  

IFC forecasts that private firms can contribute nearly one-third of Ukraine’s $486bn worth of reconstruction efforts needed over the next decade, and which are still in their infancy. “There is no donor financing that could actually cover this [$486bn] gap. Therefore we need to leverage private capital,” says Mr García Mora. “That's the only way to really finance the reconstruction.”

In recent months the EU and US have collectively pledged more than €100bn worth of aid to Ukraine, and the former — plus the G7 — have agreed to use profits from frozen Russian assets to help the war-torn country. But these are primarily dedicated to funding Ukraine’s military defence and day-to-day running of its economy.

Among the IFC’s $1.18bn worth of guarantees and financing, which work to de-risk private investment into covered projects and are subject to board approval, is the proposed $345m funding of a 350MW wind-power project. Also at the Ukraine Recovery Conference, the European Bank of Reconstruction and Development (EBRD) announced it is entering a joint venture with Germany’s Goldbeck Solar to develop up to 500MW of solar projects in the country. 

In the communications sector, the IFC and EBRD are working towards a $435m co-financing of French investment firm NJJ Capital’s acquisition and merger of two Ukrainian telecom companies, DataGroup-Viola and Lifecell, to form a national telecom champion. 

The IFC is also financing the upgrade of Ukrainian Danube Shipping Company’s river cargo fleet to increase trade flows along the river, and attract more private investment into the firm. 

Finally, alongside the European Commission it announced a €367.5m guarantee programme expected to facilitate more than €1bn worth of manufacturing and infrastructure investment to support property projects. 

More on Ukraine:

• Azovstal’s owner commits to €2.2bn green steelworks in Italy
• Carlsberg eyes Asia to forget €2.3bn Russian write-off
• Ryanair CEO charts flight path to continued growth

‘Quite risky’

Foreign firms have already started laying the foundations of the private sector’s rebuild of Ukraine. Data from fDi Markets shows that foreign firms — some helped by investment promotion agency, UkraineInvest — are already backing projects that aid Ukraine’s reconstruction and critical infrastructure. 

Last year, Portugal’s Madoqua Renewables announced it would build a €900m methanol plant, the Netherlands’ Veon committed €600m to improving 4G services, and Irish building materials group Kingspan started work on a €200m building technology campus. Meanwhile Ryanair unveiled a $3bn plan to expand its flights to the country. 

But with the exception of Russian firms expanding in Crimea, which the Kremlin annexed in 2014, almost all of Ukraine’s 87 FDI projects tracked by fDi Markets since its full-scale invasion have been in Kyiv or to its west, away from the front line.

The IFC’s 350MW wind project is also in the country’s west. Private investment in such projects is still “quite risky … at a moment when there are still bombings from Russia,” concedes Mr García Mora. He also notes that energy projects have been “squeezed to the [west] because [there is] no operator that wants to do anything on the east.” 

However, any investor uncertainties about helping rebuild Ukraine risk being flared by the government’s reconstruction chief, Mustafa Nayyem, announcement on X on June 10 that he was resigning due to ‘systemic obstacles’ preventing him from carrying out his work.

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