EU lending arm aims to raise 100 billion euros to help rebuild Ukraine

The fund will work similarly to the one used to help small businesses during the pandemic

By Reuters

Published: Mon 4 Jul 2022, 1:48 PM

The European Investment Bank, the lending arm of the European Union, is proposing a funding structure previously used during the Covid-19 pandemic to help rebuild Ukraine with up to 100 billion euros ($104.3 billion) of investment, according to a document seen by Reuters.

The EU-Ukraine Gateway Trust Fund (E-U GTF) would seek to have an initial 20 billion euros in contributions from EU countries and the EU budget in the form of grants, loans and guarantees.

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The guarantees in particular would have a multiplier effect, leading to infrastructure projects totalling some 100 billion euros, the document said, about half of Ukraine's more immediate needs.

The EIB's proposal is set to be unveiled on Monday, the first day of the international Ukraine Recovery Conference in Switzerland that aims to provide resources to Ukraine and aid a post-war recovery.

The EIB is proposing a fund that would work like that used in the Covid-19 pandemic to guarantee financing for small and medium sized companies. It envisaged 25 billion euros leading to as much as 200 billion euros being mobilised.

The E-U GTF could contribute to rebuilding bridges or renovating water or waste water services, particularly for cities whose populations have expanded due to migration from other parts of Ukraine since the crisis started.

Projects could also focus on facilitating Ukraine's exports or on its energy and digital infrastructures. The EIB or development banks such as KfW or DFC would be able to draw on the fund or its guarantees for investments they oversee.

The fund is also designed to encourage private businesses that would likely view investment financing in Ukraine as too risky.

Using an instrument similar to one used before means it can be put into action more rapidly, so initial investments might be approved by the end of the year. It would allow others to contribute and could easily be scaled up.

The European Commission must first give its assent, with a majority of EU countries then having to approve the plan. EU states would subsequently decide whether to contribute to the fund.

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