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Newsletter #18 Reconstruction Ukraine - November 2024

Dear readers,

We are pleased to present you the November edition of our monthly newsletter, highlighting a month of both pivotal developments and significant challenges for Ukraine. Among the key events, the United States and several allied nations authorized Ukraine to strike Russian territory using their missiles, marking a decisive shift in the conflict. At the same time,  this month has also brought troubling news, as Ukraine became the first country targeted by an intercontinental missile.

In this edition, we take a closer look at the evolving macroeconomic landscape in Ukraine, including updates on the amount of international aid and key economic indicators.

We also explore the newly launched state platform designed to support IT companies, delve into the main points of President Zelensky's resilience plan, and discover a new initiative to boost women’s employment.

Additionally, we will shed light on the World Bank's latest initiatives aimed at supporting Ukraine. Then explore critical international collaborations, such as the U.S. International Development Finance Corporation’s expansion of war risk insurance, the European Union’s substantial financial contributions, and Germany’s investments in a green industrial recovery for Ukraine.

As always, we conclude with an overview of developments in the private sector.

Enjoy the read!

Ukraine Reconstruction: Key Figures

• Macro

In recent months, the Ukrainian economy has faced a series of significant challenges, including a poor harvest, power outages, and ongoing attacks on critical infrastructure. Despite these adversities, the economy has demonstrated remarkable resilience during this difficult period. Although inflation exceeded previous forecasts, GDP continued to grow, driven by the development of transport, construction and industry.

• 4.2% GDP growth for ten months of 2024, according to the Ministry of Economy of Ukraine. The National Bank of Ukraine (NBU) forecasts continued growth at a rate of 4.3–4.6% in 2025–2026.
• 9.7% consumer inflation year-on-year (YoY) as of October 2024.
• $36.6 billion are Ukraine's international reserves as of November 1, 2024, according to the National Bank of Ukraine. The National Bank forecasts that by the end of December 2024, international reserves will reach $43.6 billion, considering assurances of funding provided by international partners.
• Since the beginning of the full-scale war, external budgetary support has exceeded $100 billion.
• $27.2 billion is the total amount of state budget financing from international partners as of November 14, 2024, according to the Ministry of Finance of Ukraine. The largest contributors are:

• European Union: $13,047 million ($11,411 million in loans, $1,636 million in grants).
• United States: $6,849 million.
• International Monetary Fund (IMF): $4,189 million.
• Japan: $2,366 million (including $1,488 million in loans and $722 million in grants).
• Canada: $1,761 million.

Source: National Bank of Ukraine, Ministry of Finance of Ukraine, Ministry of Economy of Ukraine

Key developments for Ukraine’s Reconstruction

• Ukrainian President Signs 2025 State Budget and Tax Code Amendments to Bolster Defense and Ensure Financial Stability

The President of Ukraine signed the Law on the State Budget for 2025 and the Law on Amendments to the Tax Code to finance the Defence Forces and ensure financial stability. Since the onset of Russia's full-scale invasion, Ukraine’s state budget has been effectively divided into two key components:

• Military expenditures, which in 2025 will reach UAH 2.23 trillion, or 26.3% of GDP, funded through domestic revenues and borrowings.
• Non-military expenditures, including social and humanitarian programs, which are primarily supported by international partners.

To balance domestic revenues and fully finance critical military needs, it was essential to adopt amendments to the Tax Code to balance domestic revenues and finance all necessary military expenditures.

The main changes include:

• The military tax rate for individuals will increase from 1.5% to 5% on salaries, bank deposit earnings, rental income, winnings, and other income. This change takes effect the day after the law’s publication.
• 1st, 2nd, and 4th tax groups will begin paying a military tax from January 1, 2025, at a rate of 10% of the minimum wage (UAH 8,000 at the start of 2025), equivalent to UAH 800 per month.
• 3rd tax group FOPs will pay 1% of their turnover, starting from the first quarter of 2025.

The military duty for single tax payers is set to be temporary for the period of martial law.

• The corporate income tax rate for financial companies will increase to 25% starting in 2025.
• For banks, the income tax rate will rise from 25% to 50% on profits earned in 2024.

These measures aim to secure stable funding for the country’s defense.

Source: Ministry of Finance of Ukraine, Forbes.ua

• CodeUA: a national marketplace for Ukrainian IT companies

The Ministry of Digital Transformation, together with the Lviv IT Cluster, has launched CodeUA, a platform designed to streamline collaboration between Ukrainian IT companies and businesses worldwide. This initiative empowers Ukrainian companies to expand their reach, increase exports, and attract foreign investment — a vital step in driving the growth of both the IT sector and the Ukrainian economy.

The advantages of this service include:

• Verified Quality: all companies and clients undergo a thorough verification process, ensuring you’re working with trusted professionals.
• Easy Access without hidden fees: you only pay for the services of your chosen specialist, with no hidden fees for using the platform.
• Comprehensive services: CodeUA provides an array of services that facilitate smooth collaboration: legal consultations, concierge service, in-platform communication

Any technology company with a representative office or branch in Ukraine that meets the requirements of Code.UA can register on the platform for free. Foreign clients get access to trusted partners and convenient tools for interaction.

Mykhailo Fedorov, Minister of Digital Transformation, notes that the launch of the platform is another step towards promoting Ukraine's brand as a high-tech country. This is a call to foreign companies to cooperate with Ukrainian companies, build win-win relationships and invest in them now.

Source: Ministry of Digital Transformation of Ukraine, CodeUA

• Internal Resilience Plan of the President of Ukraine

On 19 November, the 1,000th day of Russia's full-scale invasion of Ukraine, President Volodymyr Zelenskyy presented the Resilience Plan to the Verkhovna Rada of Ukraine.

The Internal Resilience Plan consists of 10 points:

• Unity. The President emphasised the importance of unity both internally and externally. International partners should continue and strengthen their support for Ukraine.
• Frontline. Change of approaches to management in the army. The President also announced that a Military Ombudsman would be appointed.
• Weapons. Increased weapons production in Ukraine and cooperation with partners are envisaged. A Technology Centre will be created.
• Money. This point is yet to be approved by the business community and will have a separate annex.
• Energy. Ensuring energy stability, nuclear generation, rational energy consumption, adaptation to market relations in the energy sector after the war. Energy sustainability passports for all regions will be prepared by the end of the year. This point contains a closed annex.
• Security. Modernisation of shelter standards. Installing metal detectors at the entrance to all schools and other public buildings. Strengthening the state border.
• Communities. Special tax conditions for frontline areas.
• Human capital. National standard of accessibility. According to Zelenskyy, the institute of multiple citizenship and the restart of the diplomatic service are needed. A Ministry of Unification of Ukraine will also be created.
• Cultural sovereignty.  Promoting the establishment of Ukrainian studies departments in foreign universities.
• The policy of heroes. The policy of war memorialisation, honouring the memory of its participants, and their integration into society. There are plans to recruit veterans to the civil service.

The Internal Resilience Plan is expected to be detailed with the participation of civil society, business, cultural community, media, and human rights activists.

Source: Forbes.ua, Suspilne, Office of the President of Ukraine

• Ukraine has joined the EU Startup Nations Alliance

On November 27th, Ukraine,  along with Italy and Romania, officially joined the Europe Startup Nations Alliance (ESNA) at its annual flagship event, the ESNA Forum 2024 in Brussels. ESNA unites 26 EU member states, Iceland, and Ukraine to promote the development of thriving startup environments across its network.

This membership opens a range of opportunities for Ukrainian startups, including:

• International partnerships
• Collaboration with European startups
•  Increased competitiveness
• Technical support
• Access to new markets and European investments

Alex Bornyakov, Deputy Minister of Digital Transformation of Ukraine, emphasized that innovation is a fundamental element of Ukraine's defense capabilities and a crucial factor in building economic resilience and future success.

Source: ESNA, Ministry of Digital Transformation of Ukraine

• The launch of a project to train women in traditionally male-dominated professions

The Ministry of Economy of Ukraine has announced the launch of a new project to train women in traditionally male-dominated professions at public expense. This initiative is aimed at increasing gender equality in the professional sphere and providing businesses with qualified personnel. Ukrainian women will be able to master more than 30 professions, including:

• Tram, trolleybus and forklift driver;
• Operator of computer-controlled machines;
• Milling operator;
• Renewable energy systems installation and maintenance technician, and others.

The programme provides training for women at the request of employers who apply to employment centres.

The programme is important for overcoming gender stereotypes, increasing women's employment and supporting the economy, which suffers from a shortage of personnel.

Source: Ministry of Economy of Ukraine

World Bank's Key Initiatives for Ukraine’s Recovery and Growth

Since Russia's invasion of Ukraine, the World Bank Group has provided substantial support to help the Ukrainian government advance critical reforms and ensure the delivery of vital public services to over 15 million citizens. The World Bank has been instrumental in securing nearly $55 billion in financial support . To date (November 26, 2024), nearly $46 billion of this amount has been disbursed.  

• The World Bank launches a new $593 million private sector development programme in Ukraine.

On October 31, 2024, the World Bank announced the launch of the RISE program (Resilient, Inclusive, Sustainable Entrepreneurship) in Ukraine, a groundbreaking initiative aimed at strengthening the country’s private sector with a total funding package of $593 million.

The RISE program focuses on supporting 20,000 small and medium-sized enterprises (SMEs) and aims to create or preserve at least 40,000 jobs. By enhancing digital services, fostering better interaction between businesses and the government, and expanding access to export markets, the program addresses critical barriers to growth in Ukraine’s private sector.

The program's financial package will include: 

• A $283 million loan from the International Bank for Reconstruction and Development (IBRD). 
• A $300 million loan under the special recovery program for Ukraine and Moldova from the International Development Association (IDA) crisis fund. 
• A $10 million grant from the World Bank’s Ukraine Relief, Recovery, Reconstruction, and Reform Trust Fund (URTF). 

The Ministry of Finance of Ukraine will oversee and coordinate the RISE program, while the Ministry of Economy of Ukraine will be responsible for its implementation, monitoring, and evaluation. By the end of 2024, based on the achievement of predefined program indicators, Ukraine will be eligible to receive $400 million in additional funds for the state budget.

Source: World Bank, Ministry of Economy of Ukraine

• A new World Bank project to help strengthen Ukraine's capacity to rebuild

On November 13, Ukraine's Minister of Finance, Serhiy Marchenko, and the World Bank's Regional Director for Eastern Europe, Bob Som, signed financial agreements for the new systemic project "Supporting Ukraine’s Recovery through Governance Enhancement" (SURGE). The project aims to improve the system of public investment management at the central level and enhance public finance and fiscal management at the local and regional levels.

SURGE will be funded with a $450 million loan from the International Bank for Reconstruction and Development (IBRD), financed through the ADVANCE Ukraine trust fund, which is generously supported by the Government of Japan. Additionally, a $300 million loan has been secured from the Special Recovery Programme for Ukraine and Moldova (SPUR) of the Bank's Crisis Fund.

The financial structure of SURGE will be implemented using the World Bank’s "Program-for-Results" (PforR) financing instrument, which links disbursements directly to the achievement of specific outcomes. Ukraine is expected to fulfil the actions stipulated in the loan agreement with the IBRD by the end of 2024 and receive $400 million in funding.

Additionally, the parties signed a grant agreement for the investment component "Strengthening Government Capacity for Fiscal Reform" (STRONG) worth $10 million. It is funded by the Ukraine Relief, Recovery, Reconstruction and Reform Trust Fund (URTF) and will help Ukraine address its public administration skills gaps and provide the Government of Ukraine with the technical assistance needed to design and implement the institutional reforms agreed upon in the SURGE project.

Source: World Bank, Ministry of Finance of Ukraine

International Benchmark

• UMAEF Launches New $50 Million Direct Investment Program into SMEs in Ukraine and Moldova

The Ukraine-Moldova American Enterprise Fund (UMAEF) has announced the launch of a new $50 million Direct Investment Program designed to support small and medium-sized enterprises (SMEs) in Ukraine and Moldova. The program targets SMEs with an annual turnover of at least $5 million and an EBITDA of at least $0.5 million.

Eligible SMEs will be able to secure funding between $1 million and $3 million to meet various business needs. In Ukraine, these funds will help businesses not only to navigate current difficulties but also to capitalise on emerging opportunities and invest in sustainable growth..

The SME Direct Investment Program will provide both equity and quasi-equity financing, giving SMEs the flexibility to choose the type of funding that best supports the achievement of their strategic goals.  Beyond financial aid, UMAEF will share knowledge and expertise with SMEs to help them enhance their operational capabilities, improve strategic planning processes, and strengthen governance.

This $50 million investment demonstrates UMAEF’s commitment to fostering economic development in Ukraine and Moldova by empowering local businesses to thrive, innovate, and drive sustainable progress.

Source: UMAEF

• DFC Commits $50 Million to Expand War Risk Insurance in Ukraine

The U.S. International Development Finance Corporation (DFC) has announced a $50 million investment in political risk insurance (PRI), which will support ARX, a Ukrainian subsidiary of Fairfax Financial Holdings Limited, in expanding war risk insurance offerings. The project, facilitated by American insurance broker Aon, is set to unlock over $200 million in coverage for static assets in Ukraine.

This initiative will establish a reinsurance facility that supports ARX in underwriting war risk insurance policies for companies operating in Ukraine. By leveraging DFC’s PRI, ARX can provide more comprehensive coverage, fostering confidence among investors and reducing the risks associated with operating in a conflict zone.

Under the agreement, DFC will act as a reinsurer for ARX, which will issue insurance policies in Ukraine and cover risks of physical damage caused by the war. The implementation of this DFC mechanism is expected to have a positive impact on the number of private companies participating in reconstruction projects. DFC is also considering the possibility of providing additional reinsurance capacity to other Ukrainian insurance companies.

DFC’s PRI is one of several financial tools that the agency is employing in Ukraine, where its total portfolio of $1.7 billion will help sustain Ukraine’s economic recovery and position the country for reconstruction.

This announcement builds on DFC’s portfolio of investments in Ukraine, including a $250 million loan to strengthen food security, $25 million in PRI to help those injured in the conflict, and more than $200 million to support expanded financing for Ukrainian small businesses.

Source: DFC, ARX, Ministry of Economy of Ukraine

• EU positively assessed €4.1 billion payment to Ukraine under the Ukraine Facility

The European Commission has positively assessed the second regular payment of approximately €4.1 billion under the EU's Ukraine Facility. This funding will bolster Ukraine's macro-financial stability and support the functioning of its public administration amid the ongoing conflict. Once approved by the Council of the European Union, this disbursement will bring the total EU financial assistance for Ukraine in 2024 to €16.1 billion.

Following the assessment of the second payment request submitted by Ukraine in October, the Commission has concluded that Ukraine has satisfactorily fulfilled the nine agreed reform indicators for this payment. These reforms cover areas such the fight against corruption, business environment, labour market, regional policy, energy market and environmental protection.

The Commission has submitted to the Council its assessment of Ukraine's satisfactory fulfilment of the qualitative and quantitative indicators set out in the Ukraine Plan, together with a proposal for a Council Implementing Decision for the payment of close to €4.1 billion. The transfer to Ukraine will take place following the adoption of this decision by the Council, and the adoption of a payment decision by the Commission.

In total, Ukraine fulfilled 25 indicators of Ukraine's Plan for the Ukraine Facility in the first three quarters of 2024. 11 indicators remain to be fulfilled by the end of the year, and Ukraine will submit a report on their implementation to the European Commission in early 2025.

Source: European Commission, Ministry of Economy of Ukraine

• Germany provides an additional financing for the green industrial recovery of Ukraine

The Federal Ministry for Economic Cooperation and Development (BMZ) of Germany announced an additional €2.4 million to the project "Green industrial recovery through municipality-based development in Ukraine". This initiative is part of the broader UNIDO-Ukraine Green Industrial Recovery Programme 2024-2028, aimed at fostering sustainable industrialization and resilience across Ukraine.

A signing ceremony to conclude the funding arrangement for this contribution was held in Vienna attended among others by UNIDO’s Director General, Gerd Müller, the Permanent Representative of Germany to UNIDO, Rüdiger Rainer Bohn, and Oleksandr Oborskyi of the Permanent Mission of Ukraine to UNIDO.

Jointly undertaken by the Government of Ukraine and UNIDO, the green industrial recovery programme 2024-2028 supports the development of a resilient, green and sustainable industry in Ukraine. It focuses on creating opportunities for people, supporting businesses and attracting investment, as well as fostering a green economy. 

The new project will strengthen the capacity of public sector and government institutions at the national and municipal levels to facilitate a green industrial recovery. Supported by the deployment of regional development coordinators, this initiative focuses on empowering Ukraine’s municipalities as drivers of sustainable development and inclusive growth.

Source: UNIDO

• CEB launches a new project to support internally displaced people in Ukraine

On November 15, the Administrative Council of the Council of Europe Development Bank (CEB) approved a new initiative, “Support to Internally Displaced Persons in Ukraine.” This project, a significant step in addressing the needs of Ukraine’s internally displaced population, allocates €200 million in loans to support state budget expenditures aimed at aiding displaced individuals.

In particular, the payments include temporary accommodation, physical rehabilitation, free meals for IDP children in pre-school, school as well as vocational training institutions, and assistance in finding employment in new regions.

Olga Zykova stated that the implementation of a new initiative to support internally displaced persons in Ukraine would help to provide more than 2 million Ukrainians with the necessary assistance.

This marks the third CEB-supported project in Ukraine since the country officially joined the Bank in June 2023, bringing total funding to €400 million.

Source: Ministry of Finance of Ukraine, CEB

Focus on the private sector

• American organisation Endeavor prepares to open its office in Kyiv

The American organisation Endeavor, specialising in the support and development of technology businesses, is preparing to open its office in Ukraine. The initiative is being implemented with the support of the Ukraine-Moldova American Enterprise Fund (UMAEF) and the European Bank for Reconstruction and Development (EBRD).

Endeavor, a global non-profit organisation founded in 1997, is renowned for its extensive network that supports over 2,500 entrepreneurs across more than 40 countries. Its mission is to accelerate high-impact businesses by providing access to mentorship, strategic partnerships, and investment opportunities.

The new Endeavor office will focus on fostering the growth of Ukrainian companies in the scaling stage, with special emphasis on tech startups and businesses aiming to enter international markets. Through Endeavor, Ukrainian entrepreneurs will gain access to a global network of partners, investments via the Endeavor Catalyst Fund, and support for expanding into new markets.

Source: Endeavor,  Ekonomichna pravda, Ukraine-Moldova American Enterprise Fund

• Ukrainian startup based in the USA Raised Total Seed-stage Funding of $2.7 Million

Bavovna.AI, a U.S.-based Ukrainian developer of AI-driven autonomous navigation systems for unmanned vehicles (UVs), has announced the successful closure of a $1.7 million late-seed funding round led by Presto TechHorizons, with participation from Network VC, Allied VC, and other angel investors. The company has raised $2.7M to date and successfully closed its Seed stage funding.

This fresh capital infusion will enable the company to scale NDAA-complaint production in North America and the EMEA, enhancing its existing product lines and exploring new frontiers in both defence and commercial sectors.

Bavovna’s dual-use, AI-powered technologies enable UVs to safely and accurately operate in GPS-denied and Electronic Warfare (EW) threatened environments without maps or vehicle communication. The company’s pioneering solutions address critical challenges defence and commercial UV operators face across aerial, surface, and subsurface domains.

Source: Bavovna.AI

• Ukrainian-Dutch AI startup raises $1.45 million in investment

Ukrainian-Dutch startup Tur.ai has successfully raised $1.45 million in its seed investment round. The main investor was the Czech fund Presto Tech Horizons, which invested $1.2 million during the deal.

Tur.ai provides a platform for AI-powered robotic process automation (RPA) that enables companies to automate complex work processes on their own, without the involvement of IT specialists. According to the startup, this solution is expected to help save more than 700,000 hours per year, reduce human involvement in customer service by 50%, and increase the speed and efficiency of work.

Tur.ai will use the fresh capital for product development, improved customer support and the development of a partner distribution model to prepare the company for global expansion.

Source: AIN, Tur.ai

And Also...

• International Exhibition "ReBuild Ukraine": Uniting Efforts for Ukraine’s Reconstruction

On November 13–14, the international exhibition ReBuild Ukraine took place at EXPO XXI in Warsaw, serving as a pivotal platform for discussing and planning the reconstruction of Ukraine’s war-affected economy. The event attracted over 5,500 participants from 30 countries and approximately 500 international exhibiting companies.

ReBuild Ukraine featured several high-profile conferences focused on the country’s recovery and modernization, among them:

• European Union – Ukraine Investment Conference
• Sustainable Recovery and Investment Support
• Recovery Construction Forum 3.0
• Water Solar Recovery Forum 

The primary aim of ReBuild Ukraine was to secure financial resources and investments for the reconstruction, modernization, and European integration of Ukraine. Particular emphasis was placed on engaging the EU’s private sector in rebuilding efforts.

The event was also attended by the French-Ukrainian Chamber of Commerce and Industry (CCIFU), which helped to strengthen cooperation between French and Ukrainian companies and contributed to discussions on the prospects for Ukraine's recovery.

Source: ReBuild Ukraine, Ministry of Economy of Ukraine, CCIFU