The German government is seeking to set up an equity capital fund to rebuild Ukraine, in cooperation with international partners, and open to institutional investors’ capital, it said.

The fund would finance large-scale projects in key sectors in Ukraine, including energy, infrastructure, industry and the agricultural sector, the government said in a paper laying out a plan to rebuild Ukraine, published this week.

Institutional investors and foundations could also opt to financially support individual companies, while the government will examine the possible set up of a Ukraine Development Fund (UDF), it added.

Contributions from public donors would reduce the risk for investors to allocate capital in such a fund, creating incentives to participate in the reconstruction of a country still at war, according to the German government.

The equity fund would be complementary to other instruments including the Ukraine Recovery and Reconstruction Guarantee Facility (URGF) of the European Bank for Reconstruction and Development (EBRD), currently being considered, it said.

The fund would also be complementary to other funds such as the European Fund for Southeast Europe (EFSE), providing capital for investments in partnership with seven Ukrainian financial institutions, and the impact investment fund Green for Growth Fund (GGF).

Ukraine is already engaging with international institutions and other investors to start rebuilding the country, while the end of current conflicts are not yet in sight, and uncertainty surrounding the county’s post war settlement continue.

Indeed, discussions of what a post-war Ukraine will look like started almost immediately after Russia’s invasion on 24 February last year.

The German government plans to reach an agreement on the equity fund for Ukraine’s reconstruction, with European and international partners, at the Ukraine Recovery Conference 2024 (URC 2024) that will take place in June in Berlin.

It will advocate for such a fund within the G7+ Multi-Agency Donor Coordination Platform (MDCP), in close coordination with Ukraine, international partners, European and international institutions, it added.

Germany will also use the MDCP to push for mobilisation of the private sector to rebuild Ukraine.

It is in talks with the Ukrainian government to explore the possibility of establishing a state-owned development bank on the model of the Kreditanstalt für Wiederaufbau (KfW), which helped Germany’s reconstruction and development after the Second World War, said Svenja Schulze, minister for economic cooperation and development.

She added: “Ukrainians are already working with impressive engagement to rebuild their country [but] need more than weapons to survive in this war. Cheap financing for small and medium-sized Ukrainian businesses is one of the most effective levers for reconstruction.”

According to a report published recently by the World Bank, United Nations and European Commission, the costs for the reconstruction and recovery of Ukraine stand at approximately $486bn (€421bn).

The Swiss government decided this week to support the Ukraine’s reconstruction with CHF5bn until 2036, promoting the cooperation with the private sector. 

Until 2028, Ukraine is supported with CHF1.5bn coming from the budget of the Swiss Federal Department of Foreign Affairs (FDFA), the government added.

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