Ukraine will struggle to absorb the expected billions of western private and public sector aid for its recovery not due to corruption, but a simple lack of capacity to process and invest such huge sums, a senior Ukraine official has said on the eve of the UK-sponsored Ukraine recovery conference in London.
“It is about the capacity to work with this amount of money,” said Mustafa Nayyem, the head of the Ukraine State Agency for Restoration and Infrastructure Development.
During the two-day conference, the EU will make a pledge to spend €50bn (£42.8bn) in grants and loans over the next four years largely to keep government services afloat. The UK will offer multibillion-pound export guarantees to the World Bank and pledge to use the sophisticated London insurance markets to develop a form of war insurance to protect western investments. The US is also to announce a significant economic aid package.
The central aim of the conference, which will be attended by 1,000 delegates, is not pledge-making, but instead to stimulate private sector investment in Ukraine. The World Bank in March estimated that Ukraine faced a $430bn (£337bn) bill to replace its damaged buildings.
Nayyem, who was appointed to run the Ukrainian reconstruction agency in January and was one of the first Facebook organisers of the Maidan revolution in 2014, said it would be a challenge for Ukraine to process such huge sums.
“It is about the capacity to work with this amount of money. Historically the largest amount of money we have been capable of working with was $6bn a year in 2014. Now we are expecting much more, and it will be very difficult for the Ukrainian construction industry, government institutions and private institutions to deliver this result. It is not that the Ukrainians are bad, or corrupt. Show me the country that can do it.”
Nayyem also urged western donors not to be deterred by continuing corruption in the country nor to impose impossible conditions saying: “We cannot punish the whole country just because some people are corrupt. My generation did not start the Maidan in 2013-14 to be punished again because some oligarch was corrupt. Don’t do that. It is not good to put some mark on a country and say it is corrupt.”
Speaking at Chatham House thinktank, he also made reference to London’s reputation as a centre for Russian money laundering. “At one time I was sure it was only Ukraine. Now I am sure it is not only Ukraine. Look around you. We are in London.”
Nayyem said he already had 2,000 staff working in the regions, but admitted to a structural problem if reconstruction was exclusively directed locally. Less damaged and better-staffed cities had already submitted more claims to rebuild schools than more badly damaged eastern regions. After studying the regional distribution of initial bids for school reconstructions, he said: “I thought the war was fought in the west and not the east.”
He said the infrastructure of Ukraine before the war was “overloaded with so many facilities. We do not need so many schools, universities, hospitals that were built up during the Soviet Union but now that they are damaged and destroyed all communities want to rebuild everything, which is absurd.”
Nayyem admitted the case for rationalisation of public services was hard to sell to the Ukrainian public.
A meeting of the G7 donors coordination committee on the sidelines of the conference is expected to discuss if there should be a single fund through which international financial institutions and governments funnel their aid, as well as whether war insurance will truly unlock private sector investment in a country that is at risk of further Russian violence.
The UK will offer £2.35bn in bank loan guarantees to the World Bank over the next three years to fund Ukraine’s rebuild.
Downing Street said the guarantees amount to the first bilateral package of multi-year fiscal assistance to be set out by a G7 country.
In his address to the conference, the British prime minister, Rishi Sunak, will say : “As we’ve seen in Bakhmut and Mariupol, what Russia cannot take, it will seek to destroy. They want to do the same to Ukraine’s economy. The scale of the challenge is real. The war brought a 29% fall in Ukraine’s GDP last year.”
