This chapter analyses the macroeconomic and institutional foundations necessary for fostering a conducive environment for infrastructure investment in Ukraine. It emphasises that sustained macroeconomic stability, coupled with a predictable regulatory landscape, constitutes a prerequisite for attracting long-term capital towards complex and capital‑intensive infrastructure projects. The chapter highlights the centrality of a coherent enabling environment comprising sound public investment management practices, transparent procedures for land acquisition and spatial planning, and a clearly defined PPP framework. It also underlines the need to address corruption and integrity risks and SOE corporate governance challenges which undermine investor confidence.
Infrastructure Policy Review of Ukraine
Abstract
Maintaining stable macroeconomic conditions and a robust enabling environment is essential for attracting and sustaining investments, especially long-term and complex investments into infrastructure. Macroeconomic stability and a strong investment climate provide the predictability and certainty that investors need to manage and mitigate risks, achieve returns, and commit to projects with long gestation periods. External shocks have had a major impact on the country’s macroeconomic stability, with Ukraine struggling to create more favorable conditions for foreign and private investment over the years.
To address infrastructure gaps, an enabling environment should involve sound policy frameworks that support effective project planning and preparation procedures and build institutional capacity. Clear legal and regulatory frameworks for private participation in infrastructure are also essential as large‑scale projects often entail complex contractual arrangements and long-term budgetary commitments. Managing corruption risks across the infrastructure lifecycle, addressing bureaucratic inefficiencies and improving co‑ordination among relevant public entities can further enhance investor confidence and yield smooth project implementation. Strengthening these elements is key to unlocking private capital inflows and ensuring infrastructure projects – whether economic or social – are sustainable, resilient, and aligned with national development strategies.
State‑owned enterprises (SOEs) can play an integral role in sponsoring, operating, and financing infrastructure assets, as well as filling investment gaps where private sector participation remains limited. In Ukraine, SOEs have played a prominent role in the nation’s economy, especially in sectors like energy, transportation, and utilities.1 Ukrainian SOEs are an integral part of the infrastructure landscape as infrastructure assets and utilities are primarily owned and managed by SOEs. Their role is therefore critical when discussing private investment in infrastructure. While well-managed SOEs can mobilise public and private capital and enhance delivery of essential services, poorly managed SOEs can deter private investment. This is especially the case in economies where SOEs enjoy preferential treatment, have weighty public policy objectives that impact return on investment or have weak corporate governance.
The Global Financial Crisis of 2008-2009, Russia’s invasion of Crimea and the Donbas in 2014, the COVID‑19 pandemic and Russia’s full-scale invasion of Ukraine in 2022 have constituted major shocks to Ukraine’s economy which have severely affected its growth prospects (Figure 5.1, Panel A). Russia’s full-scale invasion in 2022 resulted in a large fall in Ukraine’s GDP of ‑28.8% and an increase in annual inflation of 20.2%. Despite achieving growth rates of 5.3% in 2023 and 3.5% in 2024 and lower levels of inflation – which decreased to 6.5% in 2024 but rebounded to 14% during the first half of 2025 – current IMF projections indicate that Ukraine’s economy may not reach pre‑invasion levels before 2029. Relative to peers, Ukraine’s economy was half the size of Romania’s in 2024, having been of almost equal size in 2013 (Figure 5.1, Panel B). GDP per capita in 2020 was at the same levels as in 2008, remaining the lowest among peers (Figure 5.1, Panel C).
Ukraine’s budget deficit widened from ‑4% of GDP in 2021 to ‑19% in 2023 and remained above ‑17% in 2024 (Figure 5.2, Panel B). Ukraine’s debt-to-GDP ratio has increased sharply, reaching 87% of GDP in 2024 (Figure 5.2, Panel A). External debt has doubled from USD 57 billion in 2021 to USD 120 billion in 2024 and now represents 72% of Ukraine’s total state debt and state guaranteed debt, up from 58% in 2021. Ukraine’s larger debt stock has increased the country’s interest costs from 3% of GDP in 2021 to 4% in 2024 (OECD, 2025[1]). Concessional financing constitutes approximately 60% of outstanding public debt (OECD, 2026[2]).
Note: In Panel A, EMDE=emerging markets and developing economies as defined by the IMF. Peers include Bulgaria, Hungary, Moldova, Romania and the Slovak Republic.
Source: International Monetary Fund (2025[3]), IMF World Economic Outlook Database, https://data.imf.org/en/datasets/IMF.RES: WEO.
Challenges to public debt management in Ukraine, which are limiting fiscal space, include a high and growing share of external and foreign currency debt leading to increased currency risks; a front-loaded redemption profile with short average maturities for domestic issuance; limited liquidity in the domestic bond market with ownership and risk concentrated in the banking sector; and rapidly growing explicit and implicit contingent liabilities which could have a substantial impact on debt sustainability (OECD, 2026[2]). The widening fiscal deficit and the sharp increase in public debt have also significantly constrained the government’s ability to directly finance infrastructure investments, act as a co‑investor in large projects or provide guarantees and other forms of risk-sharing instruments needed to mobilise private capital.
Restoring fiscal and debt sustainability will be critical to improve Ukraine’s sovereign credit rating. A cautious approach will thus be required as Ukraine considers debt financing to support post-war spending priorities (International Monetary Fund, 2024[4]).
Source: International Monetary Fund (2025[3]), IMF World Economic Outlook Database, https://data.imf.org/en/datasets/IMF.RES:WEO; Ministry of Finance of Ukraine (2026[5]), https://mof.gov.ua/en/derzhavnij-borg-ta-garantovanij-derzhavju-borg.
The currency’s value stabilised at around 27 hryvnias per US dollar until Russia’s full-scale invasion in 2022. In the immediate aftermath of the 2022 invasion, the National Bank of Ukraine (NBU) temporarily established a fixed exchange rate regime – initially at UAH/USD 29.25 and subsequently at UAH/USD 36.57 in July 2022 (see Figure 5.3, Panel A). Since October 2023, the NBU transitioned to a managed, flexible exchange rate regime, which provides for bilateral exchange rate fluctuations depending on changes in market conditions. As a result, the exchange rate fluctuated at around 40 hryvnias per US dollar in 2024, 42 hryvnias per US dollar in 2025 and 43 hryvnias per US dollar in January-February 2026. Capital controls aimed at stabilising the currency were also introduced in areas such as import payments, dividend repatriation and foreign currency loans which are being progressively phased out although various restrictions remain in place. The latest measures introduced by the NBU in August 2025 allowed businesses to repatriate dividends for the period of activity starting on 1 January 2023 (rather than 1 January 2024 as was previously the case) with a monthly limit of EUR 1 million.
Companies are also able to service and repay external loans issued by a pool of foreign lenders not only to International Financial Institutions (IFI) who are participants in the pool but also to first-class foreign banks rated at least “A”. Transfers to satisfy recourse claims of foreign guarantors and insurers that have repaid a Ukrainian borrower’s debt on such loans have also been allowed (National Bank of Ukraine, 2025[6]).
Since the invasion of Crimea and the Donbas, Ukraine has been building up its foreign exchange reserves. These have increased from USD 7.5 billion in 2014 to over USD 57 billion by the end of 2025. Reserve levels in terms of months of imports have also increased from over 1 month in 2014 to 5.5 months of imports in 2024 (Figure 5.3, Panel B).
Note: Peers in Panel B includes Hungary, Bulgaria and Romania.
Source: World Bank (n.d.[7]), World Development Indicators Database, https://databank.worldbank.org/source/world-development-indicators.
Ukraine’s economy is facing major challenges to maintain macroeconomic stability and address the country’s financing needs across sectors. External support remains critical to navigate these difficult times and strike a balance between meeting defence spending requirements and responding to citizen needs. Ukraine should pursue its efforts to lay the foundation for stronger institutions and policy frameworks that can accelerate its recovery in the post-war period, contribute to the stability of its economy and strengthen the enabling environment for infrastructure financing and investment.
5.2.1. Enabling environment for foreign investment
Ukraine has taken steps to create a more favourable environment for foreign investment by adopting legislation that protects foreign investors and is guided by the principle of non-discrimination (OECD, 2021[8]). These measures seek to provide protections against changes in legislation, nationalisation, improper performance by state or municipal bodies, termination of the investment activity and repatriation of profits. Ukraine’s network of bilateral investment treaties and its PPP framework also recognises arbitration as a dispute settlement mechanism. Foreign business entities are entitled by law to the same rights and obligations as Ukrainian business entities and benefit from most favoured nation treatment (Verkhovna Rada of Ukraine, 1991[9]).
However, attracting foreign investment remains a critical challenge for Ukraine. External factors, notably Russia’s invasion of Crimea and the Donbas in 2014 and its most recent full-scale invasion, have strongly influenced investment risks. The country’s sovereign credit rating has suffered major downgrades and Ukrainian private counterparty default rates have significantly increased (see Figure 5.4, Panels A and B). International reinsurers and lenders have reduced exposure, and insurance for war-related risks remains costly or unavailable (EBRD, 2024[10]) (CSIS, 2023[11]) (MIGA, 2024[12]). At the same time, gaps in the enforcement and implementation of foreign investment protection measures, regulatory fragmentation and complex procedures have created legal uncertainties, regulatory challenges and lack of predictability that affect investor confidence and limit Ukraine’s capacity to attract foreign investment.
Note: In Panel A LT=long-term. Takes latest value for each year.
Source: Panel A: S&P Global (n.d.[13]), https://www.spglobal.com/en; Ministry of Finance of Ukraine (2024[14]) Credit Rating, https://mof.gov.ua/en/kreditnij-rejting-potochni-rejtingi-zagalna‑informacija‑istorichni-zmini; Panel B: World Bank (2026[15]) Global Emerging Markets (GEMs) Risk Database, https://data360.worldbank.org/en/dataset/IFC_GEM; S&P Global (n.d.[13]), https://www.spglobal.com/en.
Foreign Direct Investment (FDI) has remained weak and volatile since the 2008-2009 Global Financial Crisis, following a similar pattern to peers in Central and Eastern Europe (see Figure 5.5, Panel A). Russia’s 2022 invasion had a strong and immediate impact, with FDI inflows falling from USD 7.3 billion in 2021 to USD 348 million in 2022. In 2023 Ukraine was able to recover to USD 4.3 billion of FDI inflows but these dropped to USD 3.5 billion in 2024 (Ministry of Economy of Ukraine & Kyiv School of Economics, 2024[16]; National Bank of Ukraine, 2026[17]). FDI stock as a share of GDP has also been in decline, falling from 50% of GDP in 2016 to 33% in 2021 (see Figure 5.5, Panel B).
Note: In Panel A, peers include Bulgaria, Hungary and Romania. In Panel B Central and Eastern Europe and Developing Economies classification are based on UNCTAD.
Source: OECD (n.d.[18]) FDI main aggregates, BMD4, https://data-explorer.oecd.org/s/4fx; National Bank of Ukraine (2026[17]), https://bank.gov.ua/en/statistic/sector-external.
According to the NBU, round tripping transactions, which are those where the ultimate control investor is a Ukrainian resident, represented 25.2% of FDI inflows in Ukraine (excluding reinvestment of earnings) during the 2010-2025 period (National Bank of Ukraine, 2025[19]; Rogoff and Movchan, 2022[20]), signalling that FDI inflows may be even lower than official statistics present. These transactions were routed through some of Ukraine’s main foreign investors such as Cyprus, the Netherlands, Switzerland and Austria.
Beyond external factors affecting Ukraine’s macroeconomic stability and sovereign credit ratings – as well as currency controls under martial law which are being gradually eased but may continue to constrain foreign investment inflows to Ukraine – the country is seeking to improve its investment climate to attract greater levels of foreign investment. This has included the establishment of incentive schemes to support investment projects with significant investments (see Box 5.1). However, there may be scope to further assess the overall effectiveness of tax incentives provided within such programmes, in line with international practices (OECD, 2026[21]; 2025[1]).
Ukraine has put in place a series of mechanisms to incentivise foreign investment into the country. The Law on State Support for Investment Projects with Significant Investments – which was adopted in 2020 but became effectively operational in 2024 following the adoption of CMU Resolution No. 468 – provides a legal framework for the provision of financial and non-financial state support to private investors through special investment agreements (Verkhovna Rada of Ukraine, 2020[22]; Cabinet of Ministers of Ukraine, 2024[23]). The law applies to projects exceeding EUR 12 million, with a duration of at least five years, subject to the eligibility criteria established by the legislation. Key benefits of the initiative may include: corporate income tax (CIT) exemptions, as well as exemptions from value‑added tax (VAT) and import duties for new equipment and components, in accordance with the Tax and Customs Codes of Ukraine; the use of state or municipal land plots under the conditions defined by law; and compensation for the costs of connecting to engineering and transport networks necessary for the implementation of the project. The total amount of government support cannot exceed 30% of the planned investment amount. State support under this framework is granted on a case‑by-case basis through individual investment agreements, subject to eligibility criteria, fiscal limits and approval procedures set forth in the legislation.
Although public incentives are not perceived as essential by private investors in infrastructure, OECD analysis has shown that their role in subsidising and/or incentivising private participation in infrastructure is important, particularly in markets where the role of public entities is still dominant and the PPP market is relatively small, as is the case in Ukraine (OECD, 2017[24]). International experience shows that investment incentives such as viability gap funding (grants) combined with project preparation support through public development funds have contributed to increase the value of private investment in PPPs (see Section5.3).
5.2.2. Land acquisition
Property rights and land acquisition remain key bottlenecks in the development of infrastructure, and require better co‑ordination, vertically and horizontally, if infrastructure financing is to increase in the country. Recent changes to land market regulation have simplified the procedures to change the purpose of land plots for the rapid reconstruction of Ukraine and have made it possible for Ukrainian legal entities to buy up to 10 000 hectares of agricultural land.
However, challenges remain in allocating land for infrastructure development, particularly for large‑scale transport projects. Uncertainties around land acquisition timelines and procedures increase project preparation risks and costs and deter private investment. The main difficulties include incomplete land registry information, with missing, outdated, or inaccurate information, complicating the identification and formal allocation of plots for infrastructure development. In addition, local authorities lack approved or up-to-date spatial plans (master plans), which are essential to legally change the designated use of land plots and minimise integrity risks when doing so. In some cases, fragmented land ownership where land is privately owned in small parcels, with unclear or unregistered boundaries, limited availability of state or communal land adjacent to project corridors, and slow procedures for servitude establishment (legal right to use someone else’s land for specific, limited purposes without owning it) or expropriation can also complicate the consolidation of land for large‑scale infrastructure projects (Verkhovna Rada of Ukraine, 2002[25]).
The land registry needs to accelerate the identification of land ownership. Local authorities also need to clarify and update their master plans to be able to adjust the zoning if needed and render such procedures more transparent. Transparency of procedures to rent or sell state‑owned or municipal land also needs to be strengthened. The digitisation of the land registry could also assist to ensure transparency of land rights and co‑ordination across levels of government.
5.2.3. Corporate governance of SOEs
SOEs in Ukraine play a major role in key economic sectors such as energy and transport. According to the Ministry of Economy, 1 000 SOEs remained economically active in 2024 (Ministry of Economy of Ukraine & Kyiv School of Economics, 2024[16]). Prior to Russia’s 2022 invasion, Ukraine’s SOEs were estimated to account for 12% of total employment which is above the levels of OECD countries with the largest SOE sectors based on the percentage of total (non-agriculture) employment (OECD, 2021[26]).
Several of Ukraine’s largest SOEs operate in the transport sector and play a strategic role in its national infrastructure. These include Ukrzaliznytsia (Ukrainian Railways), responsible for over 80% of freight and passenger rail transport; Boryspil International Airport, Ukraine’s main air hub, and Ukrainian Sea Ports Authority (USPA), which manages and maintains port infrastructure.
In 2019, SOEs had an average return on equity of 0.3% compared to 8% for the private sector (European Commission, 2023[27]). In 2022, the SOE portfolio generated losses of UAH 154 billion (USD 3.7 billion), whereas it achieved a profit of UAH 22.5 billion (USD 540 million, resulting in a total net loss of UAH 131 billion (USD 3.1 billion) (OECD, 2026[28]). The total amount of outstanding long-term debt of SOEs amounted to UAH 211 billion (around EUR 5.3 billion) at the end of 2022. The portion of profitable SOEs as a share of all SOEs in 2022 was 18%, a steady decrease from 32% in 2018 and 25% in 2021 (Government of Ukraine, 2024[29]).
Ukrainian SOEs are undercapitalised as a result of weak corporate governance structures, with limited access to credit, and unable to undertake necessary long-term investments (Government of Ukraine, 2024[29]). A significant proportion of SOEs still operate under legal regimes anchored in the Commercial Code of Ukraine, which has been marked for full repeal by January 2028 (and majority repeal in 2025) under Law No. № 4 196‑IX (Verkhovna Rada of Ukraine, 2025[30]). This reform includes a requirement for all unitary SOEs to convert into joint stock or limited liability companies with the aim of standardising the organisational and legal forms of Ukrainian enterprises, promoting greater efficiency and transparency in the management of Ukraine’s SOEs and ensuring a level playing field between public and private companies.
Ukraine’s Ministry of Economy and its State Property Fund have established a series of strategic objectives around the management of SOEs for the period 2024-2027 which includes preparing for privatisation, and continuing to improve their corporate governance and performance (Ministry of Economy of Ukraine & Kyiv School of Economics, 2024[16]). The State Property Fund has been given powers to liquidate assets under its control and accelerate the removal of inactive SOEs from the state’s property portfolio, which could reduce fiscal risks for the state and curb corruption (OECD, 2025[1]; Government of Ukraine, 2024[29]).. Around 74% of SOEs are scheduled for privatisation or liquidation, 16% will remain under state ownership, and 9% will temporarily remain state‑owned during martial law, with potential divestment once conditions permit (OECD, 2025[1]). This restructuring of the SOE portfolio is expected to reduce fiscal risks and allow greater policy focus on economically significant infrastructure SOEs.
As privatisation of the main transport sector SOEs is not being envisaged, measures to improve their corporate governance will be critical. In the medium term, Ukraine could consolidate oversight of economically significant SOEs under a centralised or co‑ordinated ownership model in line with recommendations (OECD, 2026[28]). More immediate measures could include the establishment of co‑ordination frameworks to ensure oversight, monitoring and compliance with the 2024 Law on Amendments to Certain Legislative Acts of Ukraine on Improving Corporate Governance, which among other objectives aimed at limiting discretional practices and exceptions when defining and approving strategies and financial plans and when appointing managers to SOEs.
The process of mandatory adoption of International Financial Reporting Standards (IFRS) as established in the Law on Accounting and Financial Reporting in Ukraine should also be resumed as soon as exemptions related to martial law are phased out, in order to improve internal control and audit systems in SOEs and strengthen Ukraine’s SOE management practices, performance and investment potential (Government of Ukraine, 2024[29]; Verkhovna Rada of Ukraine, 2024[31]).
Given the role that SOEs play in the transport sector, identifying the appropriate legal form, the expected level of state ownership/control and what this means in terms of corporate governance will be a key consideration for any investor who may wish to enter into a PPP or concession arrangement with such entities or provide financing through capital markets. In particular, steps taken on the financial management of SOEs to make them financially sound will be important to understand. SOEs need to be managed at arms’ length if they are to be efficient and productive. Improved corporate governance of Ukraine’s key transport SOEs could also facilitate capital market financing if listings of SOE shares are considered as part of efforts to revitalise domestic equity markets (OECD, 2026[2]). In the medium-term it could also lead to improved financing terms for companies which have listed in foreign exchanges, such as Ukrainian Railways (see section 8.2).
5.2.4. Anti-corruption efforts in infrastructure
Ukraine has been taking steps to develop its anti-corruption framework over the past decade. Citizen experiences with corruption have dropped in recent years, although perception of corruption remains elevated, even compared to the OECD average (see Figure 5.6, Panels A and B). Weakness in the rule of law, arbitrary law enforcement and the non-enforcement of court decisions, as well as compromised judicial independence continue to undermine investors’ confidence and a level playing field for businesses (OECD, 2025[1]). Business surveys reflect concern with the overall effectiveness of the judicial system, with 72% of respondents noting that the risk of corruption in the judicial system remains a major obstacle (American Chamber of Commerce Ukraine, 2024[32]). According to the European Business Association survey, 80 CEOs from the largest international and Ukrainian companies believe that the investment climate in Ukraine is either rather unfavourable (59%) or extremely unfavourable (20%), citing corruption, weak judiciary and the shadow economy among their top five concerns (European Business Association, 2024[33]).
Note: In Panel A: Result are based on a poll that is part of the eighth Corruption Perception and Experience series (since 2007) and was conducted from June to August 2024 by the Kyiv International Institute of Sociology (KIIS). It surveyed 13 151 respondents across 3 groups: the general population, internally displaced Ukrainians (IDPs), and externally displaced Ukrainians (EDPs). In Panel B, 0=worse performing, 100=best performing.
Source: OECD (2025[34]), OECD Integrity and Anti-Corruption Review of Ukraine, https://www.oecd.org/en/publications/oecd-integrity-and-anti-corruption-review-of-ukraine_7dbe965b-en.html; OECD (2025[1]), Economic Survey of Ukraine, https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/05/oecd-economic-surveys-ukraine-2025_0bb82ef9/940cee85-en.pdf.
Integrity of processes and governance can lead to trust in infrastructure projects and avoid adverse downstream effects such as misappropriation of resources, delays, inflated project costs, and ultimately poor-quality infrastructure (Zhang et al., 2023[35]). Systemic factors can compromise integrity and contribute to low levels of trust in government and the rule of law, raising the level of uncertainty and its negative impact on the business climate (Schoeberlein, 2019[36]).
Corruption risk can materialise across the different phases of the infrastructure lifecycle (see Table 5.1). Taking appropriate measures to tackle them is critical to support effective public investment, avoid loss of trust in the public sector, improve the government’s capacity to mobilise domestic revenue and attract private investment (OECD, 2021[37]).
Source: OECD (2025[38]) Infrastructure Anti-Corruption Toolbox, https://www.oecd.org/content/dam/oecd/en/networks/galvanizing-the-private-sector/Infrastructure-Anti-Corruption-Toolbox-Handbook.pdf.
Ukraine adopted an Anti-Corruption Strategy for 2021-2025 and is in the process of developing a new Strategy for the 2026-2030 period. The National Agency on Corruption Prevention (NACP) is in charge of monitoring implementation of the action plans of these strategies. In the 2021-2025 Strategy, infrastructure was identified as one of the priority areas. The Strategy highlighted the need to minimise corruption risk in construction, land relations and road infrastructure projects and noted that construction of large infrastructure facilities was perceived to be one of the areas where corruption is prevalent (National Agency on Corruption Prevention of Ukraine, 2021[39]). The new draft Anti-Corruption Strategy until 2030 also provides for a wide set of action priorities in construction, restoration, energy sector, public procurement, and land sector aiming at improving legislation, delivering better regulation, ensuring proper oversight measures, and increasing transparency.
These concerns are further explored in a report released in July 2025 by the NACP, the State Audit Service and the Basel Institute which have identified ten corruption risks across project identification, design, tender management, and evaluation and audit in the reconstruction of Ukraine’s civilian infrastructure (National Agency on Corruption Prevention of Ukraine; et al., 2025[40]). These point to weaknesses in the selection and prioritisation of projects and oversight of the quality of project documentation; gaps in the legal procedures and oversight by procurement authorities of the pricing of construction materials; deficiencies in the criteria to define the content, scope and quality of supporting services in construction; unclear requirements to justify direct contracts under martial law; untimely or selective disclosure of the full scope of tender documentation which impacts open competition; lack of effective control over the procedure for changing terms in subcontract agreements; absence of integrated electronic systems for recording payments for completed construction works; and lack of state architectural and construction supervision over the implementation of reconstruction projects as a result of martial law.
OECD analysis on the alignment of Ukraine’s frameworks with the OECD Guidelines on Corporate Governance of SOEs have also underlined that integrity and fairness in procurement processes involving SOEs remains an area of concern, as SOEs were among the procuring entities with the highest number of complaints (OECD, 2026[28]). These complaints suggested shortcomings in internal procurement capacity, procedural knowledge and oversight mechanisms within SOEs. Participation of SOEs in public procurement as bidders also present challenges resulting from implicit advantages in their access to state guarantees, concessional financing, tax deferrals which may not be available to private competitors and can distort competition in sector such as infrastructure.
Overall, by the end of 2025 half of the measures envisaged in the 2021-2025 anti-corruption strategy to minimise corruption risk in infrastructure projects had been fully or partially implemented since the establishment of implementation monitoring in 2023 (National Agency on Corruption Prevention of Ukraine, 2023[41]). Without safeguards that fair and transparent procedures are being taken in the various stages in the infrastructure lifecycle, it is difficult to commit given the long-term nature and complexity of projects. Corruption remains a key concern and Ukraine should continue to take action to prevent corruption, manage corruption risks and prosecute corruption offences, building on recent progress to detect, investigate, and prosecute corrupt officials, including in areas such as infrastructure, as well as on tackling foreign bribery.
Digitalised procedures and open data can play a significant role in providing transparency and accountability with respect to the actual costs of project implementation – including real-time data on market prices for construction materials – and facilitating monitoring and oversight in the execution of public funds allocated to infrastructure investment (OECD, 2021[37]). Establishing a database of restricted suppliers including the names of companies and individuals banned from doing business in the public sector because of failure to perform in previous contracts, corruption, fraud or tender irregularities could contribute to strengthen accountability and transparency (G20 Japanese Presidency, 2019[42]). Such measure could build on recent progress to establish the State Register of Persons Committing Corruption or Corruption Related Offences, which identifies entities found guilty of corruption offences that are banned from participating in bidding for public contracts. Building on recent reforms mandating independent boards in large SOEs, supervisory boards should be explicitly tasked with overseeing the design, implementation, and monitoring of anti-corruption programmes and fully implement and enforce newly introduced external audit requirements, ensuring that audits are carried out independently and systematically across the SOE portfolio (OECD, 2026[28]). Having clear and standardised procedures and contracts will also be important to limit the potential for corruption, and reassure investors that corruption risk is being managed. Clauses dealing with performance monitoring, performance‑related penalty schemes, change orders, force majeure, change in law, reporting requirements, dispute resolution mechanisms, refinancing, termination events and hand-back of assets appear to be most relevant areas for PPP contract standardisation (IMF, 2021[43]).
5.3.1. Long-term planning of projects and development of an infrastructure pipeline
In May 2024, Ukraine established the Strategic Investment Council whose main tasks include the definition of strategic priorities for public investment; the development of a single project pipeline for public investments, which includes projects that may be brought forward with private sector participation through PPPs; the endorsement of specific projects for the annual budget; and the co‑ordination of different actors involved in the planning of public investment projects (International Monetary Fund, 2024[44]). The establishment of the Council represents an important step towards improving strategic coherence and predictability in public investment planning that is critical to build investor confidence and mobilise private investment.
In September 2024, the Strategic Investment Council published the first portfolio of public investment projects, which included a total of 789 projects worth UAH 2.6 trillion (USD 63 billion) across multiple sectors to be implemented over the coming years (Government of Ukraine, 2025[45]). This represented important progress to build a pipeline of projects (see also sections 2.1 and 2.2). The transport sector featured second both in terms of number of projects as well as estimated total cost, with 133 projects amounting to UAH 313 billion (USD 7.5 billion) (see Figure 5.7 Panels A and B).
The Strategic Investment Council has developed a list of priority projects for financing in 2025, building on the single project pipeline that was released in 2024. Ukrainian authorities have reportedly been consulting academics, international stakeholders and technical experts to select and prioritise projects (CEE Bankwatch Network; et al., 2025[46]). This is an informal consultation process to support more systematic expert involvement in project prioritisation and selection.
Source: DREAM (n.d.[47]), Analytics Database https://bi.dream.gov.ua/#/spp.
The Cabinet of Ministers (CMU) has also adopted Resolution No. 232; established the Interagency Commission for Public Investment Allocation chaired by the Minister of Finance; and adopted a detailed Procedure for Allocating State Budget Funds to public investment projects and programmes (Cabinet of Ministers of Ukraine, 2025[48]). These arrangements aim to strengthen fiscal discipline and co‑ordination in public investment allocation, which is essential to ensure consistency between budget decisions and the project pipeline.
5.3.2. PPPs and concessions
Efforts to improve Ukraine’s long-term planning practices and build an infrastructure pipeline have also involved reforms to establish more detailed procedures for the preparation, evaluation, portfolio formation, and implementation of public investment projects including PPPs at all levels of government through the adoption of Resolution No. 527.
The establishment of a clear framework to conduct feasibility studies addresses long-standing weaknesses in the preparation of major infrastructure projects in Ukraine by: improving the timing and quality of economic appraisal; integrating environmental and social impact assessments within the feasibility stage to make them part of the main project selection criteria; avoiding understated operation and maintenance costs by considering lifecycle costing and identifying clear funding sources; and introducing more structured, qualitative and quantitative PPP suitability checks (see also Section 2.2).
Despite adopting PPP legislation in 2010, the number of PPP projects in Ukraine that reached financial close remains limited. Loopholes in Ukraine’s regulatory framework on PPPs and lack of implementation capacity within relevant institutions such as the PPP Agency and line ministries has hindered Ukraine’s ability to scale up PPPs. Since 2022, the development of new PPPs has been further constrained by heightened investor risk perception and legal uncertainties due to martial law.
In June 2025, Law No. 4 510‑IX On Public‑Private Partnership to modernise and further align the PPP and concession legal frameworks with EU practices was approved (Verkhovna Rada of Ukraine, 2025[49]). Key elements in this law not reflected in previous legislation include: the recognition of PPP financing models that combine public funds with donor and private financing; the possibility for SOEs to play a more active role in project preparation and implementation; an expanded set of mechanisms through which the state can support the implementation of a PPP, including guarantees, co-financing arrangements, financial and in-kind incentives; key terms of a PPP agreement that can contribute to reduce uncertainty and lead to more balanced risk allocation between public and private partners; an expanded definition of a concession agreement setting out more clearly the general obligations of the grantor and the concessionaire; an explicit stability of legislation provision applicable to the PPP agreement, noting the possibility for the PPP agreement to establish the procedure, conditions and amount of compensation for losses and damages to the private partner as a result of amendments to legislation that have affected the performance of the PPP agreement; the possibility for public entities to take measures to form a land plot of state or municipal property necessary for the implementation of the PPP project; and the option to terminate the PPP agreement if 12 months after its conclusion the private partner has not obtained the right to use the land plot necessary for the implementation of the PPP project.
Other key provisions for private investors included in previous frameworks which remain in place include the possibility of resolving disputes related to the implementation of a PPP or concession agreement through international arbitration or other mechanism defined in the tender documentation and the PPP or concession agreement and the right for the private partners to open an account in national or foreign currency in a Ukrainian bank to be used exclusively for servicing activities related to the PPP. In addition, amendments to the Budget Code of Ukraine put in place in 2022 allow state and local authorities to undertake multi-year budget commitments under PPP agreements, including availability payments. A public register of long-term obligations for PPPs has also been created, which includes the annual volume and period of payment of long-term liabilities. These measures support investor confidence in Ukraine’s PPP framework.
The modernisation of Ukraine’s PPP frameworks builds on recent reforms which defined a unified process for preparation and appraisal of PPP projects for state and municipal assets and provided a definition of an investment feasibility study and its various components. PPP and concession projects are subject to an environmental impact assessment which needs to be carried out in accordance with the specifications of the 2017 Law on Environmental Impact Assessments (EIAs). A quantitative assessment of certain social impacts may also be required but the scope of such assessments remains limited compared to EIAs (see also Section 2.3).
In terms of financial reporting for PPP and concession projects, public partners are required to submit standardised annual reports to the Ministry of Economy, covering the status of contract implementation, key performance indicators defined in the agreement, financial obligations of the private partner (including investments, revenues, tariffs, payments to public budgets and outstanding liabilities), as well as information on state support measures and risk allocation (Ministry of Economic Development, Trade and Agriculture of Ukraine, 2020[50]). This reporting framework also supports the monitoring of long-term PPP commitments and contributes to fiscal oversight.
Despite these important regulatory improvements, Ukraine still faces significant implementation challenges to develop bankable PPP projects, primarily due to the complexity of project preparation, fragmented institutional responsibilities, and limited availability of reliable feasibility studies. This undermines investor confidence and increases transaction costs. Even if better project preparation is necessary for all types of public investment projects, ensuring bankability is even more important for PPPs. Such challenges underscore the importance of technical assistance for project preparation provided by the PPP Agency with the support of MDBs as well as the need for clearer and detailed methodological guidance for feasibility studies. International experience with public development funds can provide insights to strengthen Ukraine’s capacity to prepare PPPs (see Box 5.2).
Private investors often cite the lack of bankable PPP projects as a barrier to scale up investment in infrastructure. Project development funds (PDFs) – defined as dedicated vehicles which governments establish to systematically support PPP project preparation – have emerged as a policy approach that can contribute to address this challenge.
Given that preparation of PPP projects is often more costly than for conventionally delivered projects and has been estimated to range from 5%to 12% of total investment costs, PDFs can serve as mechanism to support the allocation of funding for PPP project preparation and ensure timely availability of funds for the hiring of transaction advisors. These advisors can in turn provide expertise to undertake feasibility studies and conduct project due diligence; design and structure PPPs and prepare tender documents. Beyond funding, project development funds can also contribute to build capacity among PPP units and build familiarity with PPPs across the public administration.
PDFs have often also been established alongside other government support mechanisms which may include: project viability support (for instance viability gap funds that serve as government grants which make projects viable and reduce the required private investment); credit support (for instance guarantee funds to improve project creditworthiness; financing instruments (for instance through local development finance institutions which provide financing otherwise unavailable in local financial markets).
International experience has shown that PDFs can contribute to successful development of PPP programmes and support the number of PPP projects reaching financial close. For example, in India, the combination of a PDF with viability gap funding vehicles and a local DFI led to a quadrupling in the value of private investment in PPPs from 2006 to 2012. The Philippines’ PDF support to 45 projects has coincided with a large increase in the PPP pipeline, which grew from 10 projects (valued at USD 3 billion) to 50 projects (valued at USD 25 billion). South Africa’s PDF supported more than 70 projects, at the national, provincial, and municipal levels.
Source: World Bank Group (2024[51]), Project Development Funds. Supporting project preparation to structure successful PPPs, https://documents1.worldbank.org/curated/en/099053124132550754/pdf/P179271-a64e304b-e2ef-480c-92d8-d6c646824c90.pdf.
The short-term impact of reforms to improve Ukraine’s PPP framework will also be influenced by the broader need to strengthen Ukraine’s public debt management practices. Ukraine’s agreements with the IMF have meant that the Ministry of Finance of Ukraine will need to maintain strict control over any new fiscal liabilities and require a detailed assessment of potential PPP impacts on debt sustainability. Therefore, debt sustainability considerations will impact the volume of long-term commitments under availability payment PPPs that Ukraine will be able to assume. Maintaining transparency around these liabilities will be critical to provide confidence to private investors around the state’s capacity to undertake PPPs.
Another significant constraint for PPP development in Ukraine is the country’s exposure to political and regulatory risks – including war risks, risks of unilateral contract termination, changes in tariff regulation, and the overall stability of the legal framework – resulting from Russia’s full-scale invasion. Provision of guarantees such as political risk insurance or partial risk guarantees will therefore be critical to support PPP development (see Section 6.2).
Given the limited scope of PPPs in the country, and the need to develop more financially sustainable infrastructure, with appropriate risk allocation and efficiency, Ukraine should pursue its efforts to consolidate a robust framework for PPPs that taps into the private sector expertise and financing and supports the development of a pipeline of PPP projects. Building on recent reforms, project preparation procedures for PPPs should remain transparent and ensure that the decision to undertake PPPs is decided on merits of Value for Money, with the Ministry of Finance playing a central gateway role to identify fiscal risks before any decision to pursue PPPs is taken and as a PPP project develops. Ukraine should also ensure that contingent liabilities arising from PPPs are consistently recorded in the existing public registry of long-term liabilities, including in cases where Ukrainian SOEs may act as developers, in order to support private investment while ensuring debt sustainability.
The regulatory framework for PPPs would also benefit for greater clarity in terms of implementation authority between the PPP agency and the Ministry of Finance, the Ministry of Economy, Environment and Agriculture, and the Ministry for Development of Communities and Territories. In addition, the PPP Law needs to be better leveraged to expand the types of PPPs that are used, particularly those that will make it possible to support greenfield investments. Ukraine still depends on concession contracts, which limits the experience of the government to develop PPPs.
Manage public debt and contingent liabilities prudently – including those arising from PPPs – to safeguard debt sustainability and support investor confidence. While the need for public investment to rebuild infrastructure is high, Ukraine needs to consider its approach to funding infrastructure projects for reconstruction while closely monitoring its debt servicing needs. Maintaining stable macroeconomic conditions and debt management that are conducive to future debt issuance and preservation of Ukraine’s sovereign credit rating will be key to strengthen the enabling environment for infrastructure investment. Debt sustainability remains an important policy goal for Ukraine, the country therefore requires the contingent liabilities that arise from PPPs to be systematically recorded in a public registry of long-term liabilities, including in cases where Ukrainian SOEs may act as developers, as part of efforts to improve public debt management and build investor confidence around the country’s capacity to manage PPPs.
Gradually lift capital controls in line with macroeconomic conditions to facilitate foreign investment inflows. For foreign investment to enter Ukraine at scale, the country will have to manage an eventual exit from its capital controls. Ukraine is already taking measures to allow repatriation under certain conditions and should monitor the situation for infrastructure‑related investment returns to be repatriated when merited.
Improve land registry, local spatial planning and state land management practices to remove structural barriers to project implementation. The land registry needs to accelerate the identification of land ownership. Local authorities also need to clarify and update their master plans to be able to adjust the zoning if needed and render such procedures more transparent. Transparency of procedures to rent or sell state‑owned or municipal also needs to be strengthened. The digitisation of the land registry could also assist to ensure transparency of land rights and co‑ordination across levels of government.
Reform SOE governance to ensure financial soundness, transparent oversight and arm’s length state involvement, particularly for infrastructure critical SOEs. The governance and performance of SOEs should be improved, ensuring sustainable financial management, arm’s length involvement by the government, and integrity and transparency in institutions as well as decision making processes to improve operation and management of key infrastructure assets. Given the likelihood that infrastructure investors may have to engage in business transactions with SOEs, it is imperative that the business viability as well as the financial status of SOEs is addressed. Identifying the appropriate legal form, the expected level of state ownership/control and what this means in terms of corporate governance will be a key consideration for any investor who may wish to enter into a PPP or concession arrangement with such entities. The process of mandatory adoption of IFRS accounting standards should be resumed as soon as exemptions related to martial law are phased out, in order to improve internal control and audit systems in SOEs and strengthen Ukraine’s SOE management practices, performance and investment potential.
Formalise stakeholder consultations for project prioritisation. The Strategic Investment Council should formalise its consultation process with stakeholders to ensure an open, transparent and clear process in determining priority projects and the role of private investment.
Strengthen PPP project preparation at all levels of government. Technical assistance for project preparation is essential and should be made available more broadly by the PPP Agency with the support of MDBs, including at regional and local levels where institutional resources are constrained. In addition, clearer and detailed methodological guidance for feasibility studies should be developed for all projects. International experience with public development funds can provide insights to strengthen Ukraine’s capacity to prepare PPPs.
Support PPP development through provision of risk mitigation mechanisms while systematically recording liabilities and ensuring transparency. If PPPs are to be developed, the private sector will require state support through risk mitigation. Various risk mitigation mechanisms such as guarantees, credit enhancements or first loss equity should be examined, and the institution that can provide this considered, if more private sector participation through PPPs is to take place. Due consideration will need to be given to the contingent liabilities which may result from provision of these instruments.
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← 1. Throughout the report, references to state‑owned enterprises (SOEs) also encompass joint-stock companies in which the state holds and exercises control over 50% or more of the shares. While such entities are not legally classified as state‑owned enterprises under Ukrainian law, they perform an equivalent economic and functional role in the infrastructure sector. In practice, many key infrastructure monopolies in Ukraine, including the national railway operator, are organised as joint-stock companies with 100% state ownership, and similar ownership structures apply to a significant number of infrastructure operators across sectors.