Remarks by the Director General at the International Conference of Experts on the Recovery, Reconstruction and Modernization of Ukraine

Remarks by the Director General at the International Conference of Experts on the Recovery, Reconstruction and Modernization of Ukraine

As prepared for delivery

October 25, 2022

Berlin, Germany

Hello and thank you very much to Chancellor Sholz and President von der Leyen for bringing us together to discuss Ukraine’s determination to recover, rebuild and modernize its economy and the role we can all 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 talk about and the mood was dark.

The world has faced shock after shock after shock. First Covid, then the Russian invasion of Ukraine, and now a cost of living crisis. An end to the war by Russia is clearly the most effective measure to improve global economic prospects. Otherwise, we must work together to limit the damage of these shocks, in particular for the most vulnerable countries and populations.

This brings me to my second point: we are here to discuss urgent support for Ukraine, devastated by war on top of the pandemic. We must support the country’s ongoing transition from a phase of emergency economic management to a phase of recovery, and also prepare the ground for a successful reconstruction towards a dynamic and competitive economy.

The Ukrainian authorities have deserved this support. After the Russian invasion, they did an impressive job of managing the economy under extremely difficult circumstances. And the international community acted decisively – they came together to commit $35 billion in grants and loans in 2022 for the people of Ukraine. Building on the commendable efforts of the Ukrainian authorities, this has put a floor under the Ukrainian economy.

Disbursement of all funds committed in 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.

On our side, we are taking action: the IMF has provided $2.7 billion of own resources to Ukraine this year through emergency financing, and channeled an additional $2.2 billion through from our managed 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 major effort from its partners.

Our current assessment is that monthly funding requirements in 2023 will be approximately 3 to 4 billion dollars, reflecting the harsh reality of the large budget deficit in the context of a devastating war. If the destruction of Ukrainian infrastructure and economic activities worsens further, the range can go up to 5 billion dollars. This funding is for what we call “recovery phase”during which the economy stabilizes and the country follows an appropriate set of macroeconomic policies.

We arrived at these figures in close cooperation with the Ukrainian authorities on the 2023 budget. It is not an easy task, because events on the ground change every day and it is very difficult to develop a set of macroeconomic projections as a basis. for the budget. In the best-case scenario, we estimate that Ukraine’s financing needs would be around $3 billion per month. When we incorporate additional funding for higher gas imports and some critical infrastructure repairs, we quickly reach $4 billion per month. Recent missile attacks, which have clearly caused much more damage, not only confirm the validity of these estimates, but lead us to consider a higher range of $5 billion.

When we take a deeper look at damage assessment and reconstruction, what we might call the “rebuilding phase”—the funding required is truly staggering. The World Bank’s Rapid Damage Needs Assessment estimated the total damage at $97 billion, with housing and transport being the most affected sectors. According to local experts, the number is already higher, reaching 130 billion. Beyond the damage costs, the Bank estimates total reconstruction needs at around $349 billion.

These are truly staggering numbers, far beyond Ukraine’s annual GDP of $200 billion in 2021, before the Russian invasion.

This tells us that the rehabilitation and reconstruction of Ukraine will require a massive and sustained effort on the part of the Ukrainian people. And we, the international community, are called upon to do our part.

This brings me to my last point. How does the IMF help?

We have built strong relationships with Ukraine over the years and since the first day of the Russian invasion, we have supported the authorities’ macroeconomic policies, both with expertise and funding. An IMF team has just completed an in-person mission to Vienna, working intensively with their Ukrainian counterparts. I am happy 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 might expect, policy-making in the context of war is incredibly difficult, so there’s still a lot of work to be done. Our next step is to work with the Ukrainian authorities to prepare Monitoring of the program with the participation of the board of directors— or PMB as it is called. This will help establish a macroeconomic framework and key near-term policies for Ukraine NOW, during the “recovery phase”. The PMB would help catalyze urgent donor support and pave the way for an eventual move to a full-fledged IMF program.

The difficult challenges facing Ukraine also underline the importance of high-level coordination of financial and economic support. We strongly support Ukraine’s proposal to create a financial and economic coordination platform to set priorities, share information, secure funding and discuss macroeconomic developments, policies and projections. In my conversations with President Zelenskyy and my meetings with Prime Minister Shmyhal, I pledged IMF support for the platform, especially in areas of our comparative strengths, such as macroeconomic framework and policies. , the extent of the funding gap and the terms of closure. I agree with President Von der Leyen’s sense of urgency and her call to organize the first meeting of the platform as soon as possible.

I expect the coordination platform to 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 that she will be there on behalf of the EBRD. And Werner will talk about the essential support the EIB can provide – both institutions are key to bringing the private sector on board and at scale.

Let me end with my sincere hope for peace for the people of Ukraine and for all the peoples of our world.


Comments are closed.