Ukraine's finance minister says reconstruction costs are rising

The nine month-long war has caused much damage and devastation in Ukraine. PHOTO: NYTIMES

LONDON - Ukraine’s Finance Minister Serhiy Marchenko said more Western support is needed to help the country meet its growing reconstruction costs following this week’s escalation of Russian missile attacks.

A blitz of Russian strikes in recent days have caused Kyiv’s biggest power outages of the nine month-long war and shut down all of Ukraine’s nuclear power plants for the first time in 40 years.

In August, the World Bank estimated it would take US$105 billion (S$144 billion) to repair Ukraine’s physical infrastructure, but Mr Marchenko told Reuters that number was rising.

“Unfortunately, this number grows every day and in the worst case scenario will increase significantly,” he said.

Mr Marchenko added that current Western support meant “we’ll have approximately US$3billion to US$3.5 billion a month vs US$5 billion this year”, which should be enough to keep the government running.

However, he said the current budget includes little for reconstruction costs which it needs to increase if possible.

Some senior European officials have estimated that it is likely to cost more than one trillion euros (S$1.4 trillion) to rebuild Ukraine after the war, which on Thursday entered its 10th month.

For now, though, Western support continues to come in waves.

The United States authorised US$400 million in military aid this week. Foreign ministers from the Group of Seven countries will discuss ensuring Ukraine’s energy supply next week, German Foreign Minister Annalena Baerbock posted on Twitter on Thursday.

The International Monetary Fund (IMF) said on Wednesday it had reached a provisional “staff level” agreement for a policy programme monitoring arrangement. Ukraine hopes the move will lead to a full-fledged programme of support worth tens of billions of dollars.

“The support from our international partners is essential for us,” Mr Marchenko said, also pointing to 18 billion euros promised by the European Union.

Ukraine this year had requested a US$15 billion to US$20 billion IMF programme, but the Fund’s debt sustainability requirements prevented its approval. Instead, a US$1.3 billion emergency deal was struck under the IMF’s new food and energy crisis programme.

IMF faces the impossibility of forecasting Ukraine’s economic capacity or reconstruction needs for the time being, or how much debt it could afford to finance.

In August, Mr Marchenko won an agreement from the country’s international creditors, including Western governments and major investment firms, for a two-year debt payment freeze.

Ukraine was “still in the situation of full unpredictability”, he said, although it still plans to remove some of the capital controls it put in place to stabilise its finances.

It would mean that from April, bond investors who have been unable to access their money during the war will receive some payments again, although Mr Marchenko urged them to reinvest that cash back into Ukraine by buying its longer-term bonds.

“We are counting on this channel to be the first to bring the private capital flows back to the country,” he said. REUTERS

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