International Financial Support for Ukraine: Overview and Prospects for 2024

Russian aggression in Ukraine has been ongoing for three years now. The invasion has inflicted staggering human and economic losses on our country, pushing it back in development by 15 years. It is forecasted that the pace of recovery in Ukraine will slow down to 3.2% this year from 4.8% in 2023, reflecting lower harvests and a persistent labor shortage. The economic prospects of the country remain dependent on external assistance and the duration of Russian aggression.

Throughout 2023, the Ukrainian government, with the support of its partners, addressed some of the most urgent needs. According to government data:

$1 billion was allocated to the housing sector, with a significant portion directed towards repairing and reconstructing damaged buildings.
Over 2,000 km of emergency repair work was conducted on highways, roads, and other national thoroughfares.
Local authorities restored approximately 500 educational institutions, with the proportion of educational facilities equipped with bomb shelters increasing from 68% to 80%.

According to the Rapid Damage and Needs Assessment (RDNA 3) published in February 2024, the cost of reconstruction and recovery amounts to $486 billion USD over the next decade, including both public and private needs.

The greatest needs are estimated in housing construction, transportation, trade and industry, agriculture, energy, social protection and livelihoods, as well as explosive hazard management.

International partners continue to actively support Ukraine. According to estimates from the National Bank of Ukraine, the country can expect to receive $38 billion in external assistance in 2024, including both grants and loans.

Here's the distribution of aid types:

Grants: $25 billion euros (approximately 66% of the total amount). Grant funds do not require repayment, making them an important source of financing for covering budget deficits and humanitarian needs.

Loans: $13 billion euros (approximately 34% of the total amount). Loans need to be repaid with interest, but they can be an important source of financing for long-term investments and development.

The largest donors supporting Ukraine in 2024 include:

European Union: The European Commission announced on April 24th the allocation of a tranche of 1.5 billion euros in macro-financial assistance to Ukraine from a large support package totaling 50 billion euros.

United States of America: The U.S. Senate passed a security bill that provides assistance to Ukraine totaling over $60 billion.

Germany: The German government has provided Ukraine with approximately 32 billion euros in comprehensive assistance since the beginning of the large-scale Russian invasion. For 2024, Germany has allocated 7.1 billion euros for Ukraine's assistance.

Japan: Japan plans to provide financial assistance to Ukraine totaling $12.1 billion.

Canada: Ukraine has received a credit from Canada in the amount of 2 billion Canadian dollars for budget support.

“Despite enormous challenges, Ukraine is undertaking challenging reforms, with an eye to cementing Ukraine’s future in the European Union and ensuring the long-term prosperity of the country,” said Antonella Bassani, World Bank Regional Vice President for Europe and Central Asia. “We commend and continue to support the Ukrainian authorities for these efforts, which has allowed Ukraine to maintain macroeconomic stability and provide essential services to its citizens. The World Bank and international partners will continue our support to help the Ukrainian people recover and rebuild their country and economy.”

Directions of Aid Utilization:

Over 50% of the received assistance is allocated towards humanitarian needs, such as providing food, water, medications, and housing for individuals affected by the war. The remaining 40% of the assistance is utilized to support Ukraine's budget, finance critical infrastructure, and reforms.

Expanded Description of Aid Utilization Directions for Ukraine:

Humanitarian Needs (50%)

2. Support to the budget of Ukraine (40%)

3. Financing of critical infrastructure (10%)
4. Business assistance (5%)
5. Restoration of damaged facilities (5%)

The World Bank considers that Ukraine overall utilizes the received aid efficiently and transparently, demonstrating significant progress in implementing reforms necessary for improving governance of public finances and preventing corruption. According to the World Bank assessments, the majority of aid funds are used as intended and have a positive impact on Ukraine's economy.

"Two years of Russia’s war in Ukraine have taken an enormous humanitarian and economic toll. Skillful policymaking supported by external financing has helped maintain macroeconomic stability, and the authorities have advanced important structural reforms. Households and business have continued adjusting to wartime conditions, leading to growth and inflation outturns in 2023 that were better than expected at the Second Review. The decision to open EU accession negotiations and approval of the €50 billion Ukraine Facility are positive developments." stated Mr. Vladyslav Rashkovan, Alternate Executive Director for Ukraine March 21, 2024

Despite the overall positive assessment, some experts note the risk of inefficient use of aid funds due to corruption and bureaucracy. These risks may be associated with the complexity of bureaucratic procedures and insufficient control over fund utilization.

The Ukrainian government is taking a series of measures to strengthen control over aid utilization, including:

Implementation of the ProZorro electronic procurement system, which ensures open and competitive bidding.
Introduction of an electronic declaration system, obligating public officials to declare their assets.
Establishment of independent anti-corruption bodies, such as the National Anti-Corruption Bureau of Ukraine.

Trends and Forecasts:

It is forecasted that the volume of aid to Ukraine in 2024 will remain at a high level but may undergo changes in structure, with a focus on supporting recovery and reforms. Therefore, it is extremely important for Ukraine to effectively utilize the received assistance to stimulate economic growth and build a resilient economy, as well as to pay attention to strengthening control over the use of this aid and preventing corruption.

"Reforms and policies aimed at stimulating private sector investment, ensuring energy-efficient and sustainable 'green' recovery, along with the implementation of a system for project prioritization and planning in medium-term budgeting, are crucial for the successful renewal of Ukraine," commented Ehor Stefanovich, Chairman of the Board of the PU UFEES, chief coordinator of the ONOVA League.

Sources of analytical data:

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