Rebuilding Ukraine requires at least 3 or 4 Marshall Plans.

Article content

Canada is stepping up its aid to Ukraine. A bolder commitment from governments and businesses is needed to make a meaningful contribution to Ukraine’s survival and recovery.

Article content

Immediately after new Russian missiles rained down on Kyiv, the Canadian-Ukrainian Chamber of Commerce and the Canadian Economic Council convened a “Rebuild Ukraine” meeting in Toronto on Wednesday, November 23 to promote additional aid to Ukraine. did. Deputy Prime Minister Chrystia Freeland headlined the day of speakers, along with a series of Canadian and Ukrainian officials and businessmen.

Article content

Article content

The meeting came shortly after the federal government unveiled the so-called “Ukrainian sovereignty bonds” in October. The facility allows individual Canadians to underwrite up to $500 million in loans from Ottawa to Kyiv in $100 increments through the International Monetary Fund (IMF).

The bond builds on $2 billion in direct financial support provided by the Government of Canada to Ukraine so far in 2022, all of which has already been disbursed and approximately $1.5 billion has been transferred through the IMF. increase. Canada has plowed more than $2.5 billion of hers into military, humanitarian and other aid to Ukraine this year. According to Ottawa, this will bring Canada’s commitments to Ukraine in 2022 above her $5 billion, which is about 63% of her total Canadian official development assistance of $6.3 billion ($7.9 billion) in 2021. Equivalent to

Article content

The big deal for Canada is that Ukraine’s expanding bucket of reconstruction costs is still declining. By June 1st, the World Bank, the European Union, and the Ukrainian government had pegged the restructuring bill at her US$349 billion.

This total is likely to exceed US$600 billion by the end of 2022, three times Ukraine’s annual GDP before the invasion. The Kyiv School of Economics (KSE) estimates that Russia added another US$31.5 billion to its bills by Labor Day. KSE estimates that about US$4.5 billion of additional civilian infrastructure is destroyed every week. On top of this, the Ukrainian government is running a deficit of about US$3 billion to her US$5 billion each month, with tax revenue declining amid economic output he expects to shrink by 33%. For context, Canada’s real GDP contracted by 5.2% during the 2020 pandemic shutdown.

Article content

Much of the current Western aid puts Ukraine in debt

Zenon Potichny, president of the Canadian-Ukrainian Chamber of Commerce, on Wednesday called for a “21st-century Marshall Plan” to rebuild Ukraine. The original US Marshall Plan to rebuild 17 European countries after World War II only provided $13.3 billion, or about $150 billion by today’s standards.

While almost all of the Marshall Plan was provided through grants or forgiven loans, much of the current Western aid has left Ukraine indebted. It should be contingent on Ukraine’s future economic recovery, not on a schedule.

Rebuilding Ukraine requires at least 3 or 4 Marshall Plans. However, it is highly unlikely that a Western government will pay for this bill. They haven’t even committed to bridging the $50 billion deficit that European academics expect Ukraine to face in 2023.

Article content

The resources provided by the West have been deployed slowly and unexpectedly. We run the risk that the Ukrainian government will persist in asking the central bank to finance its budget deficit, thereby causing catastrophic inflation, further depreciation of the Ukrainian currency, the hryvnia, and the still incomplete state of the country. increasing the likelihood of a setback in pre-war reforms. Effort.

Canada needs to make a more concerted effort to keep Ukraine alive and involve private capital in making the renewal smooth. Several speakers at the “Rebuild Ukraine” conference said American and European companies are already poised to participate in Ukraine’s war economy, post-conflict reconstruction and eventual accession to the European Union. .

Article content

The Canada-Ukraine Free Trade Agreement (CUFTA) has been in effect since 2016. In June 2022, the federal government suspended tariffs on all Ukrainian products for one year. Her Canadian Ambassador to Ukraine Larissa Galaza said in “Rebuilding Ukraine” that CUFTA is being “modernized” to include services such as her IT and back-office functions. Still, this is not enough.

Kharina Yanchenko, executive director of Ukraine’s President Zelensky’s State Investment Council, has made it clear that more private trade and direct investment are needed to deepen Western support.

Article content

However, the Export Development Council of Canada (EDC), Ottawa’s primary tool for helping Canadians doing business abroad, lists Ukraine as “limited open” to activity. The Canadian government’s self-proclaimed “international risk expert” is hedging bets at the same time that Freeland is calling on Ukraine’s allies to be as steadfast as the country’s frontline fighters and brave citizens. These restrictions need to be resolved to allow EDC’s full suite of loans, insurance and guarantees to be mobilized to reduce the uncertainties Canadian businesses face in Ukraine.

EDC should go further and work with FinDev subsidiaries. This includes expanding FinDev’s focus beyond Africa and Latin America. FinDev’s mandate has already expanded from the poorest countries to upper middle-income countries such as Peru. If there ever was a time for more mission creeps, this is it.

Article content

In all fairness to the EDC leaders, they have been tasked with the impossible task. Canadians must accept that taking risks in an existential battle for the future of democracy and a rules-based international order means that some loans and guarantees will go awry. The losses are likely to be orders of magnitude smaller than the private flows of Canadian investment and trade that EDC financial instruments can catalyze.

We need to keep trying to be bolder until EDC’s website says ‘Ukraine: Recommended for Business’.

Brett House is a Fellow of the Public Policy Forum, Munk School, and Massey College.he tweets at @BrettEHouse.