EIB ramps up Ukraine work, faces questions about global commitments

The European Investment Bank has pledged to support rebuilding efforts in Ukraine and urged urgent action and cooperation now instead of when the war ends. But as it focuses on Ukraine, it’s also fielding questions about its priorities elsewhere, officials say.

EIB has begun the disbursement of about €1 billion ($993 million) to support reconstruction efforts in Ukraine, with a focus on the north and eest of the nation, officials told Devex.

But as big dollar commitments are announced, low-income countries are beginning to suffer from growing energy and food security burdens. Some fear that funds they desperately need may be diverted to Ukraine.

“We urgently need to find a way to convince our partners in the developing world that we are doing something serious, justified, and reasonable,” EIB President Werner Hoyer told Devex.

If not, the perception may be that “their troubles, their food shortages, their security problems, their energy supply problems” are the result of NATO sanctions and not Russia’s aggression in Ukraine, he said.

“This requires a much more active development policy,” Hoyer told Devex in a recent interview in Washington, D.C.

Ukraine response

The European Commission and member states recently approved about €1.5 billion in EIB assistance to Ukraine, in addition to the €700 million it provided early during the war. EIB has already begun disbursing about €1 billion of the recent funds, focusing on investments to repair transportation, digital, and energy infrastructure.

The goal is to ensure that the Ukrainian economy doesn’t collapse and that institutions remain standing, Markus Berndt, EIB’s deputy director general and acting head of EIB Global, told Devex.

“We really need to make sure that these investments happen because, ultimately, the Ukrainian economy is the main source of reconstruction. If that collapses, we have a massive problem.” Berndt said.

“We cannot wait until this is over,” he said, adding that parts of the country, particularly in the north and west are already in reconstruction mode.

EIB will also invest an additional €540 million and continue discussions with the European Commission to step up lending in the country, he said.

While Ukraine outlined an ambitious list of needs at the Ukraine Recovery Conference held in Lugano, Italy, in July, the response fell short of expectations, and the EU needs to ramp up engagement, Berndt said.

While the topline numbers for what’s needed — upwards of €750 billion — may be daunting, what’s needed today is about €100 billion, which is doable, Berndt said.

An EIB-managed trust fund with €20 billion in guarantees could bring in about €80 billion in private capital and be quickly deployed, the officials said.

“That is not something that is going to be a bureaucratic monster, it can be set up within weeks, and we think it could be a very active, effective means to also attract more private funds for the challenges there,” Hoyer said.

The World Bank, The European Bank for Reconstruction and Development, EIB, and the International Monetary Fund are the major players in Ukraine, and all coordinate closely. Each has a different focus or expertise, including public sector policy dialogue, public sector project financing, private sector policy, and macroeconomic focus.

What’s needed now, though, is political coordination from the Group of Seven major economies, Berndt said.

A global response

Even as EIB is focused on Ukraine, partners in other parts of the world question the large influx of funds into the country and how the conflict has exacerbated challenges and intensified their needs.

The EU and EIB need to “bring life and credibility into the idea of a partnership with the developing world, particularly with Africa,” Hoyer said.

EIB must prove it is delivering and should bring concrete commitments, projects, and action plans to upcoming events such as the climate summit in November. Announcements and talk won’t cut it anymore if EIB, and the EU more broadly, want to make the case that it is serious about engagement and partnership with African nations and others, the officials said.

EIB also wants to build its brand as an institution with a global reach, largely through EIB Global branch launched earlier this year. And Berndt, who leads those efforts, said it is important to counter the misperception that EIB’s investments in Ukraine mean it will not live up to its commitment elsewhere.

“For us, that means concretely that we have to make sure that we will not step down because that's one of the fears that our partners have in Africa,” he said. That means investing in infrastructure projects to enhance local vaccine manufacturing, and more, he said.

“We have not reduced our financing in Africa because of Ukraine. Ukraine is coming on top of what we have been doing. And that is a very important message,” Berndt said.

And it has ramped up investments in areas, including a focus on food security where it has accelerated work, he said. The EIB board recently approved about €6 billion for investments to address food security and energy security in the coming years.

And EIB would like to accelerate the expansion of its business outside the EU, Hoyer said, but politics in the European Commission tend to make that a challenge.