EBRD poised to agree €4 billion capital increase to rebuild Ukraine

The European Bank for Reconstruction and Development is poised to agree only the third capital increase in its history, to pursue the “daunting financial challenge” of sustaining and rebuilding war-ravaged Ukraine. The €4 billion ($4.3 billion) injection, recommended by directors and set to be approved by governors by the end of 2023, is seen as the “most efficient way” to pump in funds without the need to obtain time-consuming guarantees from shareholder governments. EBRD believes the move will allow it to continue to provide €1.5 billion a year of financing to the country — a sum the London-based bank hopes will double to €3 billion ($3.7 billion) when the war is over and private sector enthusiasm grows. It describes support for Ukraine as “the Bank’s highest priority, now and in the future,” but also wants to avoid having to downgrade support for other countries where it operates. “Given the magnitude of the financial challenge in supporting Ukraine, a paid-in capital increase is the most efficient form of support that shareholders can provide,” EBRD President Odile Renaud-Basso said in May when the bank’s Board of Governors recognized the need to seek additional shareholder support. That level of capital increase has now been fixed at €4 billion — on top of EBRD’s existing shareholding of €30 billion. In Ukraine, the bank has financed energy security and vital infrastructure projects, including repairs from bomb damage, as well as focusing on food security and trade and supporting neighboring countries affected by the conflict. Work to “keep the lights and heating on and the train running” during the war’s early stages has expanded into support for municipal authorities and private investment. However, it has required securing one-off guarantees for specific projects from governments, primarily the Group of 7 Seven major industrial nations and in the European Union, which involves obtaining legislative approval in those countries. EBRD was founded in 1991, with a capital of 10 billion European Currency Unit, the forerunner to the euro. This was doubled in 1996, then increased further to €30 billion in 2010 following the global financial crash. A study by the World Bank, the United Nations, the EU, and Ukraine’s government put the country’s long-term recovery bill at $441 billion — a cost that will have risen hugely since the report was published in March, and prompting concerns that reconstruction will be at the cost of the world’s “poor and hungry.”