© Reuters. Residents collect items from their homes destroyed by Russian artillery, as Russia’s offensive on Ukraine continues, in the town of Vyshhorod, near Kyiv, Ukraine November 24, 2022. REUTERS/Gleb Garanich
It’s Marc Jones
LONDON (Reuters) – Ukraine’s finance minister, Serhiy Marchenko, has said Western aid is needed to help deal with soaring reconstruction costs following Russia’s arms embargo this week.
Russia’s heavy airstrikes in recent days have caused a major blackout in Kyiv during the nine-month war and shut down all of Ukraine’s nuclear plants for the first time in 40 years.
In August, the World Bank estimated that it would take $105 billion to repair Ukraine’s infrastructure, but Marchenko told Reuters that the number is rising.
“Unfortunately this number is growing every day and in the worst case scenario it will increase significantly,” he said in an emailed statement.
Marchenko added that recent Western aid means that “we will have about $3 to 3.5 billion a month against $5 billion this year,” which should be enough for the government to operate.
However, he said the current budget does not include the cost of reconstruction which should be increased if possible.
Some European officials say it could cost more than a trillion dollars to rebuild Ukraine after the war, which entered its tenth month on Thursday.
However, for now, Western aid continues to come.
The United States approved $400 million in military aid this week. The Group of Seven (G7) foreign ministers will discuss how to ensure that Ukraine provides energy next week, German Foreign Minister Annalena Baerbock wrote on Thursday.
The International Monetary Fund said on Wednesday it had reached a temporary “staff level” agreement on the preparation of the policy review process. Ukraine hopes that the move will lead to a comprehensive multi-billion dollar aid program.
“Support from our international partners is important for us,” Marchenko said, pointing to the 18 billion euros ($18.73 billion) pledged by the European Union.
Ukraine this year requested an IMF program of $ 15 to $ 20 billion, but the requirements of the Fund’s debt collection prevented approval. Instead, an emergency deal of $1.3 billion was made under the IMF’s new food and energy program.
The IMF faces the impossibility of predicting Ukraine’s economy or reconstruction needs at this time, or how much debt it can afford to pay.
In August, Marchenko won an agreement from international creditors, including Western governments and major financial firms, to pay the debt for two years.
Ukraine was “still in limbo,” he said, even as it plans to remove some of its capital controls to stabilize its currency.
It would mean that from April investors who were unable to get their money during the war will get some money back, even though Mr Marchenko has encouraged them to return the money to Ukraine by buying its long-term bonds.
“We are counting on this process to be the first to bring business capital to the country,” he said.
($1 = 0.9609 euros)