Subway, Ukravtodor Loans and Roads: What 2025 Holds for Reconstruction?

Andrii Yermak’s former deputy, Oleksii Kuleba, who is 100% trusted by the Presidential Office, has been appointed Minister of Communities, Territories and Infrastructure, while former Zhytomyr mayor Serhii Sukhomlyn, who claimed great achievements in the city's energy independence, has been appointed as head the State Agency for Reconstruction and Infrastructure Development.

New budgets are being prepared for the new staff. It is expected that in 2025 the ministry and the agency will receive more funds than these institutions had in the days of Kubrakov and Nayem. After all, they quickly went from being favorites to having a difficult relationship with the Presidential Office.

The newly appointed Kuleba and Sukhomlyn can be completely owned by Bankova and at the same time politically dependent. They can “create” corrupt officials, like Nayem. Or they can focus on changing approaches and forming a more independent and transparent model of reconstruction management for internationals.

How the budgets of key reconstruction institutions will grow: budget 2025

Do you remember how a year ago funding for the ministry and agency was cut, reducing their expenditures by three times — to UAH 39 billion for the two of them? Now the priorities have changed: formally, more money is being allocated for reconstruction. Let's find out if this is true.

The budget of the Ministry of Communities for 2025 may increase by almost 60% — from UAH 12.7 billion this year to UAH 20.2 billion.

The Agency for Reconstruction may receive a 61% increase in funding — UAH 42.5 billion compared to this year's UAH 26.4 billion.

 

We have reviewed what the funds will be used for and made sure that there will be no large-scale reconstruction similar to the Great Construction project. Money will be allocated to complete subway lines in Kharkiv and Dnipro, which will be justified by the need for shelters; pay Ukravtodor's loans from previous years and... repair roads.

This is confirmed by the main expenditure items included in the budget that the ministry and the agency will have to fulfill.

Key expense items of the Ministry out of UAH 20.2 billion for reconstruction:

• UAH 5 billion — a subvention to the regions for the Recovery Program (loan funds from the European Investment Bank for social facilities in the regions, namely hospitals, educational institutions, etc., a total of 155 social infrastructure projects);
• UAH 3.4 billion for the restoration of critical logistics infrastructure (RELINC);
• UAH 2 billion — subvention for the extension of the third subway line in Kharkiv;
• UAH 1.3 billion — expansion of critical Danube logistics chains;
• UAH 1 billion — subvention to local budgets for the Ukraine Recovery Program III (EIB loan);
• UAH 700 million — subvention to complete the construction of the subway in Dnipro;
• UAH 540 million — subvention to local budgets for compensation and repairs for damaged housing;
• UAH 462 million — compensation for destroyed housing;
• UAH 127 million — restoration of critical infrastructure facilities.

The Agency's key expense items out of UAH 42.5 billion for reconstruction:

• UAH 24.3 billion — fulfillment of loan obligations under Ukravtodor's loans;
• UAH 11.3 billion — repair and maintenance of national roads;
• UAH 6.6 billion — subvention to local budgets for road repair and maintenance;
• UAH 132 million — development of border road infrastructure on the Ukrainian-Polish border;
• UAH 1 million for the rapid restoration of infrastructure.

That is, about 70% of the 62.7 billion UAH of the budgets of both institutions for reconstruction in 2025 is planned to be spent on roads — repayment of loans for pre-war construction and new road construction.

Elimination Fund – on paper?

The Fund for the Elimination of the Consequences of Armed Aggression, which in 2023 amounted to almost UAH 62 billion and was probably the main source of reconstruction, this year consisted mainly of remains and unused funds from the previous year — UAH 23.8 billion.

Next year, it runs the risk of remaining a fund on paper with few resources for reconstruction, as it will be replenished by confiscation of Russian and sanctioned assets in Ukraine.

In addition, the Elimination Fund 2025 will be used only to compensate for destroyed and damaged housing.

Thus, what we have been warning about is happening: without a single recovery fund, reconstruction funds are being dispersed among managers and programs and are not being used according to open procedures.

Instead, the mechanism that was worked out together with the public in the Elimination Fund, with a methodology for prioritizing funding for objects, transparent commissions and the publication of applications for funds, is being curtailed. In this way, we managed to stop the massive reconstruction of stadiums and swimming pools in 2023 and the Hrynkevych family projects in 2024.

New staff — old challenges

With the new government, which mostly consists of Andrii Yermak's people, the risks of forming a single power vertical controlled by the Presidential Office are growing. Accordingly, the chances of forming independent reconstruction institutions that would be fully trusted by international partners to ensure that funds are used properly are reduced.

Especially when the main reconstruction institution is the former Ukravtodor, with its old problems and regional services.

Three challenges remain key for the new head of the State Agency:

1. organization of procurement through the Central Procurement Organization (CPO), which the agency was given the opportunity to create in April 2024. The Central Procurement Organization will help reduce risks in procurement, including of regional recovery services (road services), and ensure a high level of competition;
2. creation of a single legal entity that would unite 24 regional services, which currently feel more independent in the regions than the agency itself;
3. competitions for the heads of recovery services, which will allow rebooting the Ukravtodor system.

At the same time, the new Minister of Reconstruction, Kuleba, can take steps to increase the independence of the State Agency itself and to separate it into a central executive body with a special status. Whether these steps will be taken is solely a matter of political will.

In the meantime, it is clear that the focus of the 2025 reconstruction will be on roads and regional projects. But the procedures for transparency and accountability of the use of funds, which the international community has insisted on, may remain in the past, in the half-empty Elimination Fund.