Ukraine’s reconstruction gap: Why public finance has not yet crowded in private capital

The World Bank now puts Ukraine’s reconstruction needs at almost $600 billion. At every Ukraine Recovery Conference since Lugano in 2022, the conclusion has been the same: public money alone cannot meet a bill this size and private capital must be mobilised. Four years on, private capital has not arrived. Foreign direct investment as new equity into Ukraine since the invasion totals roughly $2.9 billion, equivalent to 1.5% of approximately $200 billion in non-military support over the same period.

The full study on Ukraine’s reconstruction gap draws on three original registers compiling project-level data from international financial institutions (IFIs), the EU Ukraine Investment Framework (UIF) and Ukraine’s Single Project Pipeline. They cover reconstruction projects announced since February 2022 and are based only on official sources. Together, they map roughly $19.3 billion across 236 IFI projects, around $7.5 billion across the UIF’s 62 announced programmes, and 146 projects worth approximately $53 billion in Ukraine’s public investment pipeline.

These registers tell a clear story: public institutions sit at every layer of reconstruction activities — as the sources of funds, as the intermediaries channelling them and as the entities implementing the projects. Public money rarely crowds in private capital and for the most part does not move ownership to private hands; it substitutes for private investment rather than mobilising it.

For money channelled to public authorities as emergency support for critical physical or social infrastructure – 34% of UIF and 33% of IFI project finance – the question of private participation does not arise, nor should it necessarily.

However, 25% of UIF and 39% of IFI reconstruction funds are channelled to publicly owned companies, which cover a continuum of activities from public service obligations to commercial, cash-generating outcomes. On the commercial end of this spectrum, there would in peacetime be some private buy-in, for example, in the form of public-private partnerships. There are a few traces of that happening: the EU’s guarantees to these companies mobilise about 30% more in IFI lending, with no announced private co-investment. A paradox is that publicly owned companies are treated as creditworthy borrowers, but not as platforms for private participation.

Even where UIF and IFI directly support the private sector, there is little documentation that this crowds in private capital. Nearly $1 billion has been raised in private reconstruction funds since February 2022, yet the ‘private’ funds rest almost exclusively on investments from IFIs and development finance institutions (DFIs).

Ukraine’s own investment pipeline runs through public authorities (25%) and publicly owned companies (75%). Of 146 projects worth $53 billion, 43% by volume generate revenue, but only an $8.9 million microgrid in Ternopil records confirmed investor interest. Two wind projects illustrate the point: a public investment of roughly $1 billion in a wind power project, recorded as revenue-generating, draws no investor interest, while a privately owned wind farm reached financial close in 2024 with $74 million of private equity behind $171 million of public debt. The difference is ownership structure, not sector.

Public finance will have to carry much of the reconstruction for the foreseeable future. The task is to direct public capital at the bottlenecks that most deter investors, placing it behind them rather than in their stead and accepting deeper coverage even where each public dollar draws in less. The point is to build the market, not to substitute for it. For policymakers, this means:

• Test publicly owned cash-generating projects for private participation — a documented offer, with the response recorded — before public financing fixes their structure.
• Deploy more public capital as guarantees and insurance behind private investors — absorbing wartime risk while the asset stays privately owned.
• Extend war-risk cover to lost income, not only physical destruction — the risk most war insurance still leaves uncovered.
• Scale equity, the one instrument that converts public support into private co-ownership rather than public-backed debt.

The challenge is not whether public finance should support reconstruction, but whether it is structured to mobilise private capital where available, or substitute for it where it is not. What is financed publicly now is, in large part, what stays publicly owned later — and how Ukraine is rebuilt during the war will decide who owns its economy after it.

The views are those of the authors and not necessarily those of ECDPM.