Remarks of the Managing Director at the International Expert Conference on the Recovery, Reconstruction and Modernization of Ukraine
October 25, 2022
Good afternoon and many thanks to Chancellor Sholz and President von der Leyen for bringing us together to discuss Ukraine’s determination to recover, reconstruct, and modernize its economy and the role we all can play in supporting its efforts.
I will use my remarks today to make three points.
First, we recently concluded our 2022 Annual Meetings, where the international community came together to focus on the world’s most pressing economic and financial issues. We had a lot to discuss, and the mood was somber.
The world has faced shock, after shock, after shock. First Covid, then Russia’s invasion of Ukraine, and now a cost-of-living crisis. Russia ending its war is clearly the single most impactful step to improve the world economic outlook. Short of it, we must work together to limit the damage from these shocks, especially for the most vulnerable countries and people.
This brings me to my second point: we are here to discuss urgently needed support to Ukraine, devastated by a war on top of the pandemic. We must support the country’s on-going shift from an emergency phase of economic management to a recovery phase, and also set the stage for a successful reconstruction towards a dynamic and competitive economy
The Ukrainian authorities have earned this support. Following Russia’s invasion they have done an impressive job in managing the economy through extremely difficult circumstances. And the international community has acted decisively — it came together to commit $35 billion in grant and loan financing in 2022 for the people of Ukraine. Building on the laudable efforts of the Ukrainian authorities, this has put a floor under the Ukrainian economy.
Disbursements of all committed funds over the remaining months of the year is urgently needed and will make a difference, especially in light of the recent horrific damage to energy infrastructure.
From our side, we are acting—the IMF has disbursed $2.7 billion of own resources to Ukraine this year through emergency financing, and channeled an additional $2.2 billion through our Administered Account.
But we also need to plan ahead. Ukraine’s financing needs in 2023 are enormous. The country will do its part, but it also needs a strong effort from its partners.
Our current assessment is that monthly financing needs in 2023 will be around $3 billion to $4 billion, reflecting the harsh reality of the large fiscal deficit in the context of a devastating war. Should destructions of Ukrainian infrastructure and economic activities become even more far-reaching the range can go up to $5 billion. This funding is for what we classify as the “recovery phase”, during which the economy stabilizes and the country follows an appropriate package of macroeconomic policies.
We arrived at these figures working closely with the Ukrainian authorities on the 2023 budget. This is no easy task, as events on the ground are shifting every day and it is very difficult to develop a set of macroeconomic projections as a basis for the budget. In a best-case scenario, we estimate that Ukraine’s financing needs would be about $3 billion per month. When we incorporate some additional financing for higher gas imports and some repair of critical infrastructure, we quickly reach $4 billion per month. The recent missile attacks, which have clearly caused much more damage, not only confirms the validity of these estimates but leads us to consider $5 billion upper range.
When we look deeper into damage assessment and reconstruction—what we could call the “reconstruction phase”—the needed financing is truly astounding. The World Bank’s Rapid Damage Needs Assessment estimated total damage at $97 billion, with housing and transport the most affected sectors. According to local experts, the number is already higher — reaching $130 billion. Beyond damage costs the Bank estimates total reconstruction needs in the order of $349 billion.
These are truly staggering figures—well beyond Ukraine’s annual GDP of $200 billion in 2021, before Russia’s invasion.
This tells us that Ukraine’s recovery and reconstruction will require a massive and sustained effort by the Ukrainian people. And we, the international community, are called upon to do our part.
This brings me to my final point. How is the IMF helping?
We have built strong relations with Ukraine over the years and from the first day of Russia’s invasion have been supporting the authorities’ macroeconomic policies, both with expertise and financing. An IMF team just concluded an in-person mission in Vienna, working intensively with their Ukrainian counterparts. I’m pleased to report that the discussions were productive and focused on the budget for 2023, financial sector issues, and the mix of policies to support macroeconomic stability.
As you would expect, policymaking in the context of a war is incredibly difficult, so there is still a lot of work to do. Our next step is to work with the Ukrainian authorities to prepare for Program Monitoring with Board Involvement—or PMB as it is known. This will help establish a macroeconomic framework and key near-term policies for Ukraine NOW, during the “recovery phase”. The PMB would help catalyze urgently needed support from donors and pave the way for eventually moving to a full-fledged IMF program.
The stark challenges faced by Ukraine also underline the importance of high level coordination of financial and economic support. We strongly endorse the Ukrainian proposal to create a financial and economic coordination platform to set priorities, share information, secure financing, and discuss macroeconomic developments, policies, and projections. In my conversations with President Zelenskyy and my meetings with Prime Minster Shmyhal I pledged the IMF’s support for the platform, especially in the areas of our comparative strengths, such as the macroeconomic framework and policies, the size of the financing gap, and modalities for closing it. I agree with President Von der Leyen’s sense of urgency and her call to have the first meeting of the platform as soon as possible.
I expect the Coordinating Platform will bring together many of the institutions and governments that are here today—from Ukraine’s bilateral donors to IFIs and national development agencies. Odile is here with me on this panel, and I have no doubt she will be there on behalf of the EBRD. And Werner will talk about the critical support that the EIB can provide — both institutions are crucial to bring the private sector on board and on scale.
Let me close with my sincere hope for peace for the people of Ukraine, and for all people in our world.
Thank you.