Ukraine's reconstruction is being financed as repair, not rebuilding

Ukraine's reconstruction is being financed at the pace of repair, not rebuilding. The latest joint assessment by the Ukrainian government, the World Bank, the European Commission and the United Nations puts the cost of recovery and reconstruction at almost $588bn over the next decade, nearly three times the country's 2025 GDP. The recovery programmes planned for 2026 with partners' support total a little over $15bn. Private capital, which donors describe as the eventual engine of recovery, brought in $2.4bn of net foreign direct investment last year. The gap between those numbers is not a failure of pledging. It is what reconstruction finance looks like while the war that causes the damage is still under way.

What the fifth assessment found

The fifth Rapid Damage and Needs Assessment, published on 23 February, covers the 46 months from February 2022 to the end of December 2025. Direct physical damage reached $195bn, up from $176bn a year earlier. Needs are spread across sectors in a way that matters for who can pay. Transport leads at about $96bn, followed by energy at about $91bn and housing at about $90bn. Commerce and industry account for about $63bn and agriculture for about $55bn. Clearing explosive hazards and debris alone is costed at almost $28bn. Fourteen per cent of the housing stock has been damaged or destroyed, affecting more than three million households.

Two changes since the previous assessment stand out. Damaged or destroyed energy assets rose by about 21 per cent, after a year of intensified Russian attacks on the energy system, and transport needs rose by 24 per cent. Prime Minister Yulia Svyrydenko, presenting the figures, said that four years into Russia's full-scale invasion the total cost had reached "nearly $588 billion over the next decade". The assessment also records that at least $20bn of needs were met through urgent repairs and early recovery between February 2022 and December 2025.

Where the money is coming from

Set against an average of close to $59bn a year implied by the ten-year estimate, the flows are modest and heavily public. The EBRD deployed a record €2.9bn in Ukraine in 2025, up from €2.4bn in 2024, and €9.1bn since 2022. Over €1.2bn of last year's total went to energy security, including loans of €270m in April and €500m in August to the state gas company Naftogaz, and €160m to Ukrnafta for distributed power generation. The bank has committed to at least €1.5bn a year for as long as the war lasts.

The EU's €50bn Ukraine Facility, which runs to 2027, is the main source of grant and loan support tied to reform. By December 2025 the Council had approved a sixth regular payment of about €2.3bn, and Ukraine had met 63 of the 68 conditions attached to payments so far. Its investment arm, the Ukraine Investment Framework, had committed €5.7bn by July 2025, expected to leverage more than €18bn of investment, using over 60 per cent of the framework's 2024–27 allocation. The largest new EU commitment is not for reconstruction at all. Of the €90bn Ukraine Support Loan finalised by the Council on 23 April, €60bn is earmarked for defence procurement and industrial capacity and €30bn for macroeconomic support.

The United States has taken a different route. The US–Ukraine Reconstruction Investment Fund, set up under the April 2025 minerals agreement, announced its first investment on 26 March: an equity stake in Sine Engineering, which develops radio communication control systems for unmanned aerial vehicles. The fund's seed capital is $150m, contributed equally by the two governments. The choice is telling. A fund created for reconstruction made its first bet on a dual-use drone technology company, because that is where Ukrainian firms currently have customers, revenue and a case for outside capital.

Why private capital is holding back

The National Bank of Ukraine's balance of payments data show the constraint plainly. Net FDI inflow fell to $2.4bn in 2025 from $3.7bn in 2024, even as the needs assessment was recording rising damage. The current account deficit reached a record $31.9bn, or 14.9 per cent of GDP, as imports rose 23.5 per cent and goods exports fell 2.7 per cent. Ukraine is absorbing far more capital than it is generating, and most of the difference is covered by official money.

The reason is not a lack of projects. It is that assets built today can be destroyed tomorrow, and investors have to price that risk. The energy sector illustrates the problem most sharply: the 21 per cent rise in damaged energy assets in a single year means that a large part of what donors and the EBRD finance in energy is replacement of equipment already financed once. Until war-risk cover is available at scale, from multilateral guarantors or state-backed schemes, private investors will keep favouring sectors with short payback periods and mobile assets, which is exactly the profile of the drone industry.

The assets question

The one source large enough to change the arithmetic is the Russian central bank reserves immobilised in the EU, roughly €210bn of which, according to Reuters, sit at Euroclear in Belgium. In December EU governments agreed to keep the assets immobilised indefinitely. The €90bn loan, however, is financed by EU borrowing and is to be repaid from reparations due by Russia, not from the reserves themselves. Moscow rejects any use of the reserves as unlawful. On 12 December the Bank of Russia filed suit against Euroclear in a Moscow court for 18.2 trillion roubles, about $230bn, and a spokesperson asked what rational investor would hold securities in the EU "if they understand that their property rights are not respected". The legal risk, whatever its merits, has so far kept the reserves out of reconstruction finance.

What would change the picture

Three things would move reconstruction from repair towards rebuilding. The first is scaled war-risk insurance, because without it the ratio of public to private money will not shift. The second is a decision on sequencing: with transport, energy and housing each needing around $90bn, partners will have to choose whether to rebuild the grid, the roads or homes first, and the choice affects whether refugees return and whether industry can restart. The third is an end to the fighting, or at least a durable reduction in strikes on infrastructure, which would stop the needs figure rising faster than the money arriving. Until then, the most accurate description of Ukraine's reconstruction is a holding operation, financed mostly by public lenders, that keeps the country's systems working and preserves the option of rebuilding later.

Sources

• World Bank — Updated Ukraine Recovery and Reconstruction Needs Assessment Released
• EBRD — EBRD 2025 finance for Ukraine rises to a record €2.9 billion
• The Ukrainian Review — EU Approves €2.3 Billion Sixth Payment under Ukraine Facility
• Ministry of Economy of Ukraine — New agreements worth €2.3 billion under the Ukraine Facility investment instrument were signed at URC 2025 in Rome
• EEAS — Council finalises €90 billion support loan to Ukraine
• US Department of the Treasury — URIF Announces First Investment
• Interfax — Ukraine's 2025 balance of payments sees surplus of $12.8 bln, National Bank of Ukraine
• MarketScreener (Reuters) — Russia's central bank seeks $230 billion in damages from Belgium's Euroclear, Moscow court says