On February 24, 2022, Russia invaded Ukraine. Thousands of civilians have been killed. The scale of destruction in Ukraine is already staggering. Millions of people are displaced, including two million children displaced outside of Ukraine. The General Assembly of the United Nations condemned Russia’s war of aggression in Ukraine. Multiple countries and international institutions have called on Russia to stop the aggression.

Although the outcome of the war is uncertain, one can start thinking about the future reconstruction of Ukraine. This paper outlines ideas for the design and requirements of this effort. We build on prior experiences with post-war reconstruction (e.g., the Marshall Plan after WWII, reunification of Germany, reconstruction of Iraq and Afghanistan) and reconstruction following natural disasters.

As a first step, we review the current situation in Ukraine. In short, the economy has experienced a large negative shock, with GDP contracting by at least 30 percent. Despite the massive economic disruption and mounting fiscal challenges, the government functions are largely operational. Ukrainians have a strong sense of common purpose and unity. Given the level of economic development and proximity to the EU, Ukraine will likely resemble Europe after WWII, rather than Iraq or Afghanistan in 2002/2003.

Next, we outline the key principles of international aid for reconstruction efforts: i) put Ukraine on the path to EU accession; ii) establish a stand-alone EU-authorised agency with significant autonomy to coordinate and manage aid and reconstruction programmes; iii) recognise that Ukraine must own its reconstruction programme; iv) encourage and facilitate inflows of foreign capital and technology transfers; v) focus aid on grants rather than loans; vi) organise rebuilding around the principle of a zero-carbon future with minimal reliance on fossil fuels. These principles aim to fully utilise a unique opportunity to modernise the country with a secure future. Building on these principles, we propose an institutional design for funnelling aid into Ukraine.

Then, we argue that the reconstruction should include three distinct phases: i) emergency response (akin to the response to a natural disaster hitting a country); ii) rapid restoration of critical infrastructure and services to revive the basic functions of the economy and the government; iii) laying foundations for a rapid, sustained growth trajectory. As we discuss in this paper, each of these stages has different objectives, constraints, and tools.

Finally, we provide tentative estimates for the reconstruction cost and benchmark these estimates against previous reconstruction efforts. After just over a month of war, the required assistance from Europe and others already likely ranges from €200 billion to €500 billion, which is comparable to the scale of aid offered in the past. However, the cost of reconstruction increases with every additional day of the war and at an increasing rate, as people spend more time away from their homes, children become more traumatised, and private sector companies disintegrate.

Full report can be downloaded here.