For more resilience

For more than two years, Ukraine has been resolutely fighting against Russia’s war of aggression, which is illegal under international law. The Ukrainians have already tolerated immeasurable suffering. Nightly bombings are a sad everyday reality in many cities – not just in the eastern part of the country. But life must go on and the economy must function, schools must remain open, and fields must be tilled while the events of the war continue to unfold. These aspects of life must remain intact if the daily needs for goods and services are to be met and even more suffering is to be prevented. KfW is supporting the country precisely in this regard.

KfW has been working closely with Ukraine on behalf of the German Federal Government since the 1990s. Back then, the concern was accompanying the transformation towards a modern, democratic state and an open economy. Now the focus has shifted to making Ukraine more resilient through civilian support – be it by restoring (social) infrastructure or creating economic prospects. Establishing a closer relationship to the EU also remains relevant.

With ongoing projects currently totalling more than EUR 1.4 billion (as of May 2024), today KfW is an important partner for Ukraine. In addition, KfW subsidiary DEG has been advising and supporting its customers from the Ukrainian private sector, particularly from the agricultural, IT and logistics sectors, on an ongoing basis since the start of the war and is supporting German companies in their investment projects via the “develoPPP” and "ImpactConnect" programmes.

KfW Development Bank’s current portfolio includes the four sectors of energy and conservation, internally displaced persons and host communities, basic social infrastructure in municipalities, and economic promotion and vocational training. The overall aim of KfW’s promotion is sustainable and resilient social and economic development in Ukraine.

Russia has repeatedly carried out targeted attacks on Ukraine’s energy system over the past two years. Power lines, substations and power plants have been and continue to be hit and damaged primarily by night-time drone attacks, making constant repair work necessary here. Electricity supply is essential for the economy and people’s everyday lives. Electricity is needed everywhere, in agriculture, in businesses, but also in schools, hospitals and private households. It is also an important prerequisite for the country’s heat supply. Especially in the second winter, it was possible to avoid major power outages thanks to the tireless repair services of the Ukrainians combined with international support, including support from KfW.

KfW’s current portfolio in the energy sector is mainly implemented with the state-owned energy company Ukrenergo and via the Ukraine Energy Support Fund. In addition to the repair work, Ukraine is also increasing the resilience of its electricity grid to Russian drone attacks, for example through physical protection devices such as concrete housings. At the same time, the grid will be modernised, made more energy-efficient and climate-friendly. The share of renewable energy is growing every year; by 600MW in 2023 alone. According to Ukrenergo, Ukraine wants to be almost carbon-neutral in ten years and ideally also supply green energy to the EU. Finally, KfW is also supporting Ukraine in connecting to the European electricity grid.

Many Ukrainians had to and have to leave their home region due to the war. Almost four million people, including one million children, are currently refugees within the country. This has led to a high demand for housing and municipal infrastructure. KfW is helping to cover this demand, especially for internally displaced people in host communities. Promotion includes education and social care for children and young people. Psychosocial care for those affected is also an aspect of this support. In addition, low-interest loans are granted for the reconstruction and renovation of buildings. The repayments can be reused and help other people to take out a loan and thus become homeowners.

More than 9,000 internally displaced persons receive some form of housing from these programmes, and around 6.8 million Ukrainians benefit from better social services.

In addition, KfW is making funds available for basic municipal infrastructure. The commitment extends to cities and communities in large parts of the country. It includes, for example, the repair and modernisation of water and wastewater systems to ensure the security of supply for the local population and internally displaced persons and to reduce the risk of diseases caused by pollution. In the city of Chernivtsi alone, this will improve the living conditions of 250,000 people. The financing of relevant social infrastructure also plays an important role. KfW has been working with the Ukraine Social Investment Fund (USIF) for many years in this area. Over the years, 500 sites and facilities have been upgraded, modernised, refurbished to be more energy efficient and better equipped throughout the country, including hospitals and health stations, kindergartens, schools and drinking water pipelines. Thousands of people benefit directly from this.

Keeping the economy running is a crucial factor in keeping people’s everyday lives as normal as possible despite the Russian attacks. In addition, the economy will also be able to recover more easily in a period after immediate fighting if it is not completely suppressed now. In this phase in particular, the private sector will play a decisive role in driving the country’s reconstruction. It is therefore important to support the economy in this acute time of crisis.

With the ongoing portfolio KfW supports the Business Development Fund (BDF) in implementing a state economic promotion programme. The BDF provides low-interest loans primarily to small and medium enterprises, which include agricultural businesses, bakeries, food retailers and small logistics companies. Through two large regional funds – the Green for Growth Fund (GGF) and the European Fund for Southeast Europe (EFSE) – KfW is supporting further financing and thus strengthening the local economy with regard to energy efficiency. The reconstruction, renovation and equipping of vocational schools are also part of the promotion. These schools are where young people learn skills relevant to the labour market.

KfW is supporting Ukraine on behalf of the German Federal Government (primarily the Federal Ministry for Economic Cooperation and Development (BMZ) and the Federal Ministry for Economic Affairs and Climate Action (BMWK)) and the EU. In part, it can draw on long-standing cooperation with various state, non-state and international partners in Ukraine:

Energy and conservation: Power Transmission Company Ukrenergo, Ministry of Energy, Ministry of Environmental Protection and Natural Ressources.
Internally displaced persons and host communities: International Organisation for Migration (IOM), State Fund for Support of Youth Housing, Ministry for Reintegration of the Temporarily Occupied Territories of Ukraine, Ukrainian Social Investment Fund (USIF), UNICEF, Norwegian Refugee Council (NRC).
Basic social infrastructure in municipalities: USIF, Ministry for Communities, Territories and Infrastructure Development of Ukraine, Municipalities of Chernivtsi, Zhytomyr, Zaporizhzhia.
Economic promotion and vocational training: Business Development Fund (BDF), Green for Growth Fund (GGF), European Fund for Southeast Europe (EFSE), IOM, USIF, Ministry of Finance

But it also aims to repair damage from the war, modernise dilapidated infrastructure and begin work on reconstruction now. Whether power lines are destroyed by attacks or buildings are damaged, reconstruction cannot wait until the battle is over. Instead, it must happen in parallel. Accordingly, KfW is continuously expanding its portfolio and adapting it to new circumstances.

Contracts worth EUR 185 million signed

Against the backdrop of this commitment, KfW was also actively participating in the Ukraine Recovery Conference (URC), which took place in Berlin on 11 and 12 June with more than 3,400 participants from many countries. Representatives of Ukrainian and international civil society, communities and the private sector attended the conference alongside governments and international organizations. The meeting was intended to contribute to ensuring that Ukraine continues to receive sufficient international funds for recovery, reconstruction, reforms and modernisation measures. Last but not least, the conference addressed the question of what conditions are needed on the government side in order to integrate the economy and increasingly mobilise private investment.

During the URC, the role of the Business Development Fund (BDF) as one of the most important and reliable instruments for promoting small and medium-sized enterprises in Ukraine was highlighted. There was also a political commitment to the gradual development of the BDF into a national development institution based on the KfW model.

KfW, which once founded the BDF, will support this process with know-how and financial resources. In addition, KfW alone signed contracts for energy and municipal infrastructure as well as vocational training totalling around EUR 185 million.

Rapprochement with the EU a topic

The closer relationship with the EU and the associated necessary reforms played an important role at the meeting in Berlin as well. At the end of 2023, the EU decided to begin accession negotiations with Ukraine. Overall, the conference – the third focusing on reconstruction after the previous conferences in Lugano and London – was intended to underpin the Western international community’s desire to continue contributing a strong civilian component in addition to military support. In addition to a large number of contracts concluded between governments, institutions and the private sector during the conference, this was achieved not least through strong expressions of solidarity. KfW Executive Board member Christiane Laibach said: "The success of the conference is tangible."

A reliable partner

KfW remains a close partner of Ukraine. It will continue to support the country in this difficult time, stand reliably by its side and take responsibility. This applies to strengthening Ukraine's resilience in the current war situation as well as to reconstruction and the process of rapprochement with the EU. The reconstruction conference in Berlin and all the documents that were signed there are living proof of this.

Ukraine Recovery Conference

Flyer: Financial Cooperation with Ukraine ( Ukrainian)

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Children sit and lie on their beds in a shelter at a kindergarten in Schytomyr.

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A man in a suit is sitting at a desk looking into the camera. In front of him on the table are a German and a Ukrainian flag.

“The backbone of the economy”

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