Swedfund contributes to Ukraine’s recovery and reconstruction

Though Russia’s full-scale invasion has significantly impacted the Ukrainian economy and led to increased poverty, Ukraine’s GDP increased by 4.8 percent in 2023 – a positive development compared to 2022, when the country’s GDP decreased by 29 percent. Ukraine is being reconstructed while the war is ongoing. Schools, hospitals and other types of infrastructure in the country’s calmer regions are being continuously repaired and rebuilt.

An extensive amount of investment is needed to reconstruct Ukraine. According to the World Bank, the EU, the UN and the Ukrainian government, the cost of reconstruction and recovery is estimated to be EUR 393 billion. The private sector will play a crucial role in the Ukrainian economy’s perseverance. Small and medium-sized enterprises need access to capital to maintain and grow businesses, create jobs, secure access to products and services as well as to generate important export revenue.

Swedfund’s experience of operating in high-risk conflict areas with both investment activities and feasibility studies can support Ukraine’s recovery and economic resilience. In 2023, we made investments in the country’s private sector and facilitated infrastructure projects in the public sector through the Project Accelerator.
Ukraine has a well-educated labour force, a strong industrial base to build upon and a resilient private sector. According to a report by the European Bank for Reconstruction and Development (EBRD), more than half of the country’s small and medium-sized enterprises have maintained or increased their level of activity compared to pre-war levels. Merely six percent have been forced to close. A good example is the IT-sector that quickly adapted and grew by six percent during 2022.

Horizon: Investing during an ongoing war

In 2023, Swedfund invested in small and medium sized IT companies in Ukraine through the fund Horizon Capital Growth Fund IV together with several other development finance institutions. The investment provides growth capital to a sector with high competence and potential to create conditions for increased export revenue, hard currency inflows and job creation, especially for young people. President Zelenzky attended the signing ceremony and highlighted the importance of investors like Swedfund who demonstrate that investing in Ukraine is possible.

By setting out clear requirements as an investor, the fund’s sustainability work is being strengthened in areas such as anti-corruption and human rights.

Coordinated efforts through an investment platform

In June, Swedfund, EBRD and a large number of other development finance institutions signed an agreement to establish a co-investment platform for Ukraine aiming to scale up investments through coordination and risk sharing. The agreement also creates more efficient ways of working by having one development finance institution represent the others, providing a simplified process for Ukrainian counterparts. It will be increasingly important to quickly and effectively scale up investments. The investment in Horizon and establishment of a Ukrainian investment platform are both good examples of how development finance institutions can provide capital that is long-term and willing to accept risks.

This case story was first published in Swedfund's Integrated Report 2023.