The EU bank – European Investment Bank – backs €200 million in loans to restore Donbas

The annexation of Crimea and military actions in eastern Ukraine have now resulted in the internal displacement of about 1.5 million people, including more than 200,000 children. During the three years of conflict, dozens of hospitals, schools and kindergartens have been destroyed or damaged. Restoring this damaged infrastructure takes time, and international organisations are providing significant support to the cause.

Last year, the European Investment Bank (EIB), in partnership with the Ukrainian Ministry of Regional Development and the United Nations Development Programme (UNDP) signed an agreement to ensure the efficient use of the Early Recovery Programme for Ukraine, a loan totalling €200 million.

Essentially, this is a loan that Ukrainian Government gets from the EU, and provides to the local communities in the five eastern regions of Ukraine. This financing is provided to Ukraine under favourable terms, ones that the EIB is capable to raise on the international financial markets – Ukraine’s Government itself would not be able to receive such beneficial conditions nowadays.

The UNDP’s role will be the monitoring of the projects. There will be several units that will make sure that planned projects will be implemented and will be implemented in high quality in the regions, where the majority of internally displaced persons (IDPs) now live.

The Ukrainian Cabinet of Ministers has already approved the first batch of proposals for restoration projects, which consists of 69 projects focused on five regions of Ukraine. The budget for the first round is €21.9 million.

The biggest among the approved projects is the planned renovation of the Central District Hospital in the town of Prymorsk in the Zaporizhya region, with a budget of €1.5 million.

The largest portion of the funds will be directed at restoring hospitals, while 35% will be devoted to the restoration of educational institutions, and 15% will go toward housing.

The majority of restoration projects are in the Kharkiv region (21 projects receiving €8.5 million). The Donetsk and Luhansk regions will get a little less (17 projects and €7.1 million and 26 projects and €3.1 million respectively). Most of the projects are directed to the frontlines of the conflict in eastern Ukraine.

Ruins of war-damaged Avdiivka, photo by National Security and Defense Council

Tendering of the projects in the Kharkiv region has already begun. Projects include reconstruction of the Kharkiv hospital and the regional specialised dispensary for radiological protection.

In Severodonetsk, the projects include the reconstruction of government facilities, building of boiler stations fuelled by pellets in several schools, and the thermo-modernisation of the school No. 20.

Roy Draycott, senior sector specialist of the regional development division at the Resident Representation of the European Investment Bank in Ukraine, explains that the Early Recovery Programme presents multiple challenges:

 “One of the main challenges lies in monitoring the implementation and quality of the projects due to their granularity and dispersion over the large territory covered by the projects. The technical assistance cooperation agreement between the EIB, Ministry for Regional Development and UNDP will help monitor the implementation of the EIB-funded Early Recovery Projects to help plan, implement and monitor recovery and peace-building related projects more effectively, including by developing capacities for contracting, procurement, social mitigation and local governance. Additional monitoring would be done by consultants provided under the technical assistance to the Ministry and EIB personnel.”


Background information:

The second phase of the project collected over 1,400 proposals from five regions of Ukraine amounting to about 10 billion hryvnias. The next batch of  selection of projects takes place in February 2017 and will be followed by the necessary tenders. Like the first phase, most of the projects will focus on health care and the recovery of educational institutions; however, some of the new projects are also focused on improving public welfare. These include the reconstruction of central heating and water supply and institutions devoted to the physical, social and cultural development of communities.