The Growford Institute has completed a joint study with experts of the Vienna Institute for International Economic Studies on the problems of the post-war reconstruction of Ukraine and the National Recovery Plan “Evaluation of Ukraine’s National Recovery Draft Plan”.
On July 4-5, 2022, the National Recovery Plan was officially presented in Lugano (Switzerland). The problems of the post-war recovery of Ukraine were also discussed at the economic forum in Berlin on October 25. In general, the National Recovery Plan can be characterized as a broad-based, comprehensive and detailed document: it outlines the main tasks for the reconstruction and rehabilitation of the war-torn country; divides each direction or goal into a set of sub-goals; and covers the necessary supporting measures, including legislative initiatives.
However, the Plan does have some shortcomings that need to be tackled in the course of its refinement. For example, some programmess of the Plan overlap with one another and are assigned the wrong priorities: agriculture and ferrous metallurgy are treated as “value-adding” sectors and are eligible for a broad set of privileges. But the selection of these priority sectors is to some extent backward looking, and merely extrapolates current economic structures. Moreover, the sources of financing, the forms of capital inflow and the full range of instruments for achieving the set goals are not specified appropriately.
The distribution of general financing of the Plan across sectors of the economy is not well justified. For instance, the planned financing of the defense and security needs is significantly underestimated (USD 50 billion), given the intensity of the military struggle and Ukraine’s high dependency on western weapons is anticipated at 50 bn USD, the planned financing of defense and security needs is significantly underestimated (USD 50 billion), given the intensity of military operations and the immense challenges involved in transforming the defence industry and modernising the Ukrainian armed forces in the post-war period. But at the same time, USD 40 billion is planned to assign the development of mortgage lending.
It is worth mentioning a lack of harmonization and poor coordination of the various programs. For example, alignment of national legislation with the EU acquis is combined with a ban on the reimbursement of VAT on exports of raw materials. The various policy initiatives are also poorly balanced in a fiscal context: for instance, a reduction in the tax burden to a level not higher 30% of GDP is unlikely to be compatible with the huge need for investment in infrastructure, the reimbursement of war-driven losses and massive fiscal support for enterprises in priority sectors.