EBRD President Odile Renaud-Basso on private capital mobilization in Ukraine

Thank you for inviting me.

So indeed, we are very large investors because we invested in the real economy 8.5 billion euros since the beginning of the war. So really a step up compared with our investment in normal times. And the objective is really not to support — we are not investing in military, we're not investing in budget support, but in the real economy: infrastructure and private sector projects. About 50% of our investment, more or less, is in the private sector in terms of volume, but a very large number of projects. And we are supporting energy, but also agribusiness, manufacturing, transportation, support to SMEs through the financial institution, and so forth. My message is that we need to continue to support Ukraine. The challenges remain. The country is extremely resilient, but the attacks from Russia, in particular very recently a step-up of attacks on the energy sector once again, on gas supply and so forth, has been very, very destructive. So we need to continue to provide support for the economy to keep running, for the country to be able to continue to support the war. We need to be very agile. So it's important — there are some discussions about the end of the IMF program, the perspective of a new IMF program, how the financing gap will be covered, but this is really absolutely needed. And I think the commitment from our shareholders to continue to support Ukraine is very important.

The SME sector is very diversified. You have a lot of SMEs in the agriculture sector, but also in manufacturing, in trade, and so on. And we support them through providing risk insurance to the bank so that we cover their portfolio up to 50%. And we see a lot of dynamics in the defense industry, so that's amazing to see, but we do not finance them directly. But this defense industry and its manufacturing capacities have been increasing very, very substantially; they have more production capacity than they can buy today. We had last year a very important investment in the telecom sector from a foreign investor, the largest foreign investment in Ukraine in the last few years, more than $400 million, and it's working very well. So it shows that the economy keeps going. Positive growth rate. So it has suffered, it has a negative impact from the war, but still the resilience is very impressive.

Private capital mobilization is very important; it will not replace ODA. Because ODA you need for some types of funding, some types of projects where you really need some concessional funding. And to mobilize private sector, you also sometimes need some concessional funding to be catalytic, so to be able to take the first loss and so forth. Because MDBs can provide a part of it, but we cannot put our capital too much at risk. We cannot expect that shareholders will provide us new capital regularly. So we need to build our own capital capabilities. Private sector mobilization is absolutely key, and we are trying to do much more in this area, developing different types of initiatives: from securitization of part of our portfolio to more mobilization of insurance companies which have some risk appetite to cover some part of our risk, to more working also on local capital markets so as to mobilize local private capital. But it will not completely replace ODA. I think the work on private capitalization is making good progress. It's something all MDBs are working on, also thinking more about a model like originate to share or distribute, which is take some bigger investment and then bring it back to the market and try to bring foreign investors. We are also working a lot on risk assessment, because there is sometimes a perception that emerging markets or developing countries are too risky. We have some very interesting data with our James database which brings together the data of all MDBs in particular in the private sector, showing that our default rate or our recovery — yes, the default is much lower than the formal rate the rating would bring you to expect. So I think that is very useful to disseminate this kind of data so as to bring a more fact-based approach to risk in these countries.

We see that first of all as a big opportunity for us as a bank to have more data, to be able to — we used to work with a quite old IT system and so forth. We've invested a lot, and AI can really help us also to have a better measurement of our impact. But it's also something in which we are keen to invest. We have some support for digital projects and bringing also the cybersecurity dimension, but also working with the business in our countries of operation so they can seize the opportunity of AI. And we work in a number of countries which have big demographic challenges with very low demographic growth, a lot of outflows, and so forth. AI can increase productivity and efficiency, can create new opportunities in these countries.