"We should start recovery now. The priorities are the protection of the energy system and the return of Ukrainians to their homes," - Sergii Marchenko in an interview with LesEchos

In an interview with the French media LesEchos, Minister of Finance of Ukraine Sergii Marchenko spoke about the results of the Ukraine Recovery Conference in London, the urgent needs for reconstruction in 2023 and the current state of the country's economic and financial systems.

Last week, at the London Conference, donor countries pledged EUR 60 billion for Ukraine's recovery. Are you satisfied with this result?

Yes, it is a good result. But we should keep in mind that at this stage it is only commitments. The real work to raise the promised funds is ahead. It may take some time, and in some cases even several years. The problem is that our urgent needs are enormous, according to World Bank’s estimates, they amount to more than USD 14 billion.

What are the most urgent needs?

One of our priorities is to restore the energy infrastructure, which was targeted by russian attacks, especially at the start of the heating season last year. We estimate that USD 3.3 billion will be needed to protect energy facilities from missile and drone attacks. This need is extremely urgent, as the energy sector could be targeted again by russia as soon as winter arrives.

The second priority is residential buildings. More than 100,000 residential buildings were destroyed and their rebuilding or restoration is estimated at  USD 1.9 billion. This is crucial, in particular, for Ukrainian refugees to return home. The repairment of hospitals, schools and other educational institutions is estimated at USD 2.3 billion. We need USD 3.5 billion for transportation and logistics. It is important to repair roads and bridges now, to develop communications with the European Union, as this is the only border we have left.

Isn't it too early to rebuild the country? You still have a war going on.

A smaller part of the Ukrainian territory is occupied. Kyiv has about the same population as before the war: some people left and others came from the occupied regions. At the same time, our air defense is getting stronger, so we can defend ourselves better. We need to start rebuilding now.

How will the funds from donor countries for reconstruction be managed?

This issue will be coordinated by the Donor Coordination Platform for Ukraine, whose secretariat is located in Brussels, with representatives from Ukraine, the European Union, the United States and other countries, as well as the World Bank, the European Investment Bank, the IMF and the OECD. 

Long-term recovery needs are estimated at more than USD 400 billion, which is twice the pre-war GDP of Ukraine. How will you be able to raise this amount of money?

It is impossible to raise and use such a large amount of proceeds at once. Before the war, public investment in Ukraine amounted to a maximum of EUR 8 billion a year. Even USD 14 billion for short-term needs is a huge amount. We have to act in stages, and we plan to involve our partners in the management of recovery projects.

Ukraine will not be able to do everything on its own?

No, because our capabilities, in terms of the number of companies and labor force, will not be enough. In the construction sector, for example, we are calling on our allies to encourage their companies to come and work in Ukraine. All countries that have provided military assistance to Ukraine will be able to participate in the reconstruction.

How do you convince foreign companies to invest in a country at war?

We realize that they need guarantees, including war risk insurance. They need to be sure that they will be compensated, for example, if a missile destroys their plant. One of the World Bank's agencies provides such insurance. Some countries have made commitments. We already have results in this area and continue to work actively.

The World Bank is concerned about the risk that some of the funds for reconstruction may be lost due to corruption in Ukraine. What is your response to this?

It is impossible to completely eradicate corruption at all levels, but we can eradicate it at least at the level of central authorities. Over the past ten years, the rules for contracting and procurement have been tightened and procedures made more transparent.

The National Anti-Corruption Bureau was created, and civil servants must declare the sources of all their income. We are now in the process of implementing a major reform of the judiciary as part of our application to join the European Union.

How is the Ukrainian economy doing after the GDP fell by almost 30% last year?

In the first quarter of 2023, GDP growth reached 2.4% compared to the last quarter of 2022. This is a good result given the ongoing war. For 2023, we forecast GDP growth of up to 3%. Inflation, which exceeded 26% in 2022, is now just over 15% and is expected to fall below this level.

Has the situation with tax revenues normalized?

The situation is stable now, we have achieved the goals we set for ourselves. In 2023, tax revenues will be at least as high as in the pre-war period, but high inflation artificially inflates these figures. Our economy is showing resilience. Only 10% of our companies have ceased operations since the beginning of the war.

On the other hand, we are controlling and optimizing budget spendings, except for the military, which now account for half of the budget.