Finance Ministry on allegations of funds for Ukraine's reconstruction being blocked

Ukraine's State Agency for Restoration and Infrastructure Development has received a €150 million tranche from the European Commission in time, but presented the financing plans to contractors without official government approval.

Source: Ukraine’s Finance Ministry's response to an EP (Ekonomichna Pravda) request

Details: The government of Ukraine and the European Commission signed an agreement to finance the Support for Rapid Economic Recovery of Ukraine programme for €250 million in November 2023.

The agreement provides funding for projects in the transport and social infrastructure areas, as well as measures to support agriculture.

Quote: "We strongly emphasise that the areas for which the European Commission allocated the grant do not include funding for the protection of energy facilities," the ministry said.

As part of this agreement, Ukraine received the first tranche of €150 million in December 2023. These funds were immediately allocated to the Restoration Agency for use. It was necessary to develop the procedure for using these funds, identify the specific projects, and have them approved by the government, the ministry said.

However, the Restoration Agency only completed the development of the procedure and the list of funding projects in March 2024. The Ministry of Finance and other responsible ministries agreed to it within 10 days. This enabled the Ministry of Restoration to present the document for government approval. However, the Ministry of Restoration has not yet done so, the Finance Ministry notes.

Quote: "Instead of adhering to established procedures, the Restoration Agency began to act independently. Specifically, it presented funding plans to contractors who had started work on projects, assuming that funding had already been secured. However, without official government approval, funding for such activities is not possible. The Agency did not have the authority to commit to paying for work when there were no funds allocated in the state budget," stated the press office.

The Finance Ministry said that the Restoration Agency is providing contractors with misinformation, falsely blaming delays on the government and the Ministry of Finance.

"The Ministry of Finance diligently secures funds from international partners through considerable effort. Therefore, it is essential to adhere to procedures that the Agency dismisses as 'bureaucratic obstacles'," the press office added.

Despite the Restoration Agency's failure to utilise the first tranche of €150 million from the EU, the Ministry of Finance continues to mobilise resources for reconstruction efforts.

In May 2024, the ministry directed a request to the EU Delegation in Ukraine for the allocation of a second tranche amounting to €100 million, intended for reconstruction (€80 million) and agricultural support (€20 million). 

Following the assessment of the request by the Finance Ministry, the EU Delegation expressed concern over the Agency's non-utilisation of the first tranche and indicated that the second tranche would be disbursed after amendments to the agreement (currently being negotiated) and would include an additional €50 million for port infrastructure recovery, as stated by the ministry.

"In light of these developments, it is incorrect to assert that funds for port infrastructure recovery are being withheld today, as even the current agreement does not encompass such a volume and direction of support," emphasised the Finance Ministry.

Background: Earlier, EP sources reported that the Finance Ministry and the government allegedly obstructed the distribution of €150 million from the EU for the protection of energy facilities due to "bureaucratic obstacles." This purportedly further impedes the allocation of the second part of the grant intended for the recovery of port infrastructure.

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