How much will it take to rebuild Ukraine?
2 min read . Updated: 20 Dec 2022, 01:12 AM IST
Premium- The astronomical cost of rebuilding Ukraine is on the minds of major Western leaders
Since the Russian invasion began in February, Ukraine has seen its cities reduced to rubble and critical civilian infrastructure bombed into ruin. The astronomical cost of rebuilding Ukraine is on the minds of major Western leaders. Mint explains:
How severe is the damage to Ukraine?
It is hard to overstate the scale of devastation in Ukraine. In just the last few months, Russia has unleashed missile and drone attacks that knocked out power and water supplies to millions in the country. Major industrial centres have suffered extensive damage. Beyond the physical damage, the economy has faced considerable pain. The World Bank estimated that the country’s GDP would contract by 35% in 2022 if the war continues. Ukraine needs between $3-4 billion monthly in external finance in 2023 just to keep its economy going. The rates of poverty are expected to rise tenfold.
What is the estimated reconstruction cost?
Between the beginning of the invasion in February and June, the total direct damage to the country’s infrastructure stood at around $97 billion with total losses at a staggering $252 billion. However, that was six months ago and attacks have intensified since then. In August, the World Bank, European Commission and Ukrainian authorities estimated that a recovery would need $349 billion. In light of Russia’s new tactics, that number has ballooned to over $750 billion, according to Ukraine’s prime minister. Some estimates put the required figure over $1 trillion.
What has been done thus far to help Ukraine?
Two global donors’ conferences have been held so far. The first was in Switzerland in July while the second in Germany in October. Despite bringing together G7 and other major partners like South Korea, these have delivered no concrete funding pledges. A global coordination mechanism to funnel investments and aid to Ukraine is being designed by the G7.
Who will foot this bill and how?
So far, the US has borne much of the cost, providing more than double the funds provided by EU institutions and member states in military gear and financial aid. Ukraine needs to meet a $38 billion hole in its budget to begin with. After that, $105 billion may be needed over years to rebuild some infrastructure. Ambitious calls for a new “Marshall Plan", referring to the US-backed recovery package for Europe after World War II, envision creating a modern, Ukrainian economy at eye-watering cost.
Are there challenges to such proposals?
Ukraine’s Western backers are going through an economic downturn. The US, too, is likely to see a slowdown in growth. Mobilizing the massive amounts may prove hard. The US, in particular, has seen aid to Ukraine become more politicized as the Republican party demands more scrutiny. Besides, corruption has haunted Ukraine for decades, and there are concerns whether the billions flowing into the country will exacerbate the corruption crisis.
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