The €50 billion European package of aid is intended to help maintain the sustainability of Ukraine's public finances, but it also includes investment instruments to accelerate Ukraine's reconstruction and modernization. Polish business will be able to use the EU funds as part of a joint venture with Ukrainian companies.
On May 8, 2024, member states of the European Union approved Ukraine's action plan, paving the way for the transfer of €50 billion under the Ukraine Facility program. In exchange for its support, Ukraine has pledged to carry out 69 reforms covering 15 sectors of the economy, including energy, agriculture, and transport. The program provides for €17 billion of non-repayable aid and €33 billion of low-cost loans to be launched until 2027. These funds are aimed at supporting the functioning of the state, decentralization, streamlining administration, economic transformation and accelerating Ukraine's integration with the EU.
The Ukraine Facility program is based on three pillars. The first, and the largest, is €38 billion to maintain the stability of public finances in the face of the ongoing war. The second pillar provides funds for investment, and the third is to finance technical assistance and administrative support, equivalent to the EU's pre-accession assistance instruments.
The second pillar is crucial for Polish business – “Ukraine Investment Framework”. This instrument aims to boost public and private investment through €9.3 billion of loan guarantees and blended finance. As part of the adopted mechanism, international financial institutions and Ukrainian banks will expand their financing programs, supporting enterprises and local governments in priority projects. These investments may concern both the reconstruction and modernization of the Ukrainian economy. Over the coming years, the program is expected to attract up to €40 billion of public and private investment.
Although Ukrainian local governments, as well as small and medium-sized enterprises will be the main beneficiaries of the program, Polish companies can participate in cooperation with Ukrainian business.
The program “Ukraine Facility” is based on the principle of conditionality, whereby further tranches of support will be provided as reforms progress. It will be crucial for Ukraine to adopt legislation on deregulation, simplification of business and digitalization of permitting procedures, as well as to align public procurement with EU standards. Gradual liberalization of the gas and electricity markets is also planned.
This year, Ukraine is expected to complete about a quarter of the tasks, which include 36 indicators, some of which have already been achieved. To date, reforms have been implemented in the corporate management of state-owned enterprises, an anti-money laundering plan has been approved, and the digitalization of the Customs Service has begun. The reforms are intended to improve Ukraine's investment attractiveness.
