“The Ukraine is under pressure and external financing remains critical,” said Odile Renaud-Basso, the President of the EBRD at the Ukraine session at the EBRD’s annual meeting on June 6. "Over the last years we have provided €10bn in funding so far. Three years ago we raised more capital to up our commitment and intended to increase investment to €1.5bn a year, but last year we distributed €2.5bn – a record.”

The EBRD has become the largest single investor into Ukraine and increased its commitment, deciding to continue its work despite an active war unfolding. “Ukraine has become our highest priority,” Renaud-Basso said.

The reconstruction work has not yet started and that will represent a whole new genre of work; the World Bank estimates that some $580bn of damage has been done and the entire economy will need investment – starting first and foremost with the reconstruction of buildings – as detailed in a bne IntelliNews feature, “the mountain to climb,” based on a detailed report by the Center for European Policy Analysis (CEPA) two years ago.

That will require mobilising a large amount of capital and it is still not clear where that money will come from.

In the meantime the EBRD has provided crucial funding to keep the economy working, providing working loans for large State-owned enterprises in the power sector and railways amongst others. But now the bank is exploring alternatives like offering loan guarantees to make a wider range of projects bankable, says Renaud-Basso.

But Ukraine is ok for money for now, Ukraine’s Minister of Finance Sergii Marchenko told the delegates at the same session. “Thanks to the EU we have covered needs for funds until 2027, and we are very grateful to the European Commission (EC) for that.”

The EU approved a two years €90bn loan for Ukraine in December two thirds of which are earmarked for defence spending; the first €9.1bn tranche is due to be released to Kyiv imminently, says Marchenko. The cash is actually only two thirds of Ukraine’s planned spending, but talks are underway with the other G7 members to raise the rest.

However, plans to raise more money to fund Ukraine’s reconstruction are already being discussed, according to Valdis Dombrovskis, the EC commissioner for economy and productivity, implementation and simplification.

“There is political momentum to sustain Ukraine’s reconstruction through 2028-2035. We have committed €100bn for the reconstruction work, although the details are still being discussed but the EU remains committed to supporting Ukraine in the long-term. This lending will follow on from the Ukraine Facility that is already operational, funded with an earlier €50bn loan, but that facility is now almost exhausted and will need to be replenished.

Future funding remains uncertain but it is already clear that the amount of money available from sovereign funding will be limited and that Ukraine’s allies are relying on the private sector to make most of the vast amounts of capital needed available.

The UK Chancellor of the Exchequer Rachel Reeves, and member of the EBRD’s board of governors, explained that one of the most useful things the UK can do, an ardent supporter of Ukraine, is help roll out war insurance for private sector companies willing to invest into Ukraine.

“Private finance is very important and funding needs could end up being in excess of €750bn. Public funding alone will not suffice. There will be a need for private capital despite the war and it will be crucial to provide war insurance to make that possible,” said Reeves. “That is where our expertise in London can come in and help de-risk these investments. The problem is not where the money will come from, but to find the right mechanism so that we can leverage up the private capital coming to Ukraine.”

Following Russia’s invasion of Ukraine in February 2022 the shock to Ukraine’s economy brought it to a halt, but after four years now it is slowly coming back to life, says Tomas Fiala, the founder and CEO of Dragon Capital, Ukraine’s biggest investment bank.

“We froze our capital expenditure in 2022 because of the macro and security risks,” says Fiala. “But by 2024 the private sector had become used to the new realities and investment started to grow again.”

The new investment calculus looked at variables like where is the frontline, how fast was it moving, what products and services were in demand as the rest of the country was still working and residents continued to live their daily lives.

“In the last 4-5 months the frontline has stabilised and stopped moving. At the same time the EU military help has been substantial and the funding commitments of around $100mn is significant,” says Fiala.

Fiala also stresses the need for workable and understandable war insurance to deal with the threats from drone and missile attacks that still loom over business daily operations, but says the level of and depth of the insurance that is currently available is still insufficient and also very expensive. However, the overall macro picture is improving.

“The economy collapsed in 2022 and shrank by 30% in 2022, but since then it has bounced back and we have seen growth of about 5% every year since then,” says Fiala.

Marchenko makes a similar point: tax revenues fell heavily in 2022, but already in 2024 in dollar terms tax revenues recovered to the pre-war levels and last year they were ahead of even that. Fiala points out that if you take out defence and security spending from the budget then last year the government ran a balanced budget while at the same time money supply is well managed, inflation has been contained and the currency exchange rate has been surprisingly stable. The Ministry of Finance has been doing a sterling job of managing an economy at war.

The EBRD also reports solid performance from its clients, with low default rates and excellent loan repayment rates, according to Renaud-Basso. “Resilience” was the word on all the panellists’ lips.

“When the war ends there will be a full scale boom,” says Renaud-Basso. “There will be very significant investment and we need to get ready for that.”

Marchenko points to the defence sector as one of the obvious candidates to drive post-war growth. Ukraine is now a world leader in drone technology and while the Ukraine war has illustrated the change in military philosophy, the Iran war has underscored the necessity for heavy investment into drone capacity.

“The defence sector will boom and it will become a key sector in our economy,” says Marchenko. “We will need to strengthen it and prepare for exports of defence products to other countries. It will also bring conditions to attract investment into other sectors and the development of the civilian economy,” Marchenko said.

But Ukraine still needs to get from here to there. US president Donald Trump suggested in the ceasefire negotiations with the Kremlin in December that Ukraine should be fast-tracked for EU accession in 2027, but that is not going to happen. In the meantime the EU is applying its conditionality on Ukraine’s accession ambitions for negotiations that are expected to last a decade.

Much progress has been made since the process started in 2014, but there are still some major hurdles to overcome – corruption and judicial reform being chief amongst them.

“Over the last decade there have been significant improvements,” says Fiala, whose Dragon Capital has been working as an investment bank throughout the Orange Revolution, the kleptocracy that was the Yanokovych administration and now a full scale war.”

“Ukraine has moved significantly towards Central Europe levels, closing the gap with the standards of the rule of law and property rights – but not full,” he adds. “The number one reform that still needs to be done is the rule of law.”

But despite the risks, the incomplete reform agenda and the war, Dragon Capital is still rolling out investments of its own capital to kick start the process. Fiala is confident that when peace returns there will be more progress that will allow Dragon Capital to roll out new investment funds and raise at least a billion dollars of private capital to begin the process of reconstructing Ukraine.

A post war boom is given. What remains unknown is if the initial round of investment, fast growth and handsome returns the brave investors can earn will be enough to reach critical mass to start the virtuous circle of investment-profits-rising income levels that fuel a sustained long-term boom.