Unlocking finance in Ukraine: the ‘missing middle’ — opinion

29 April, 09:03 PM

National Bank of Ukraine (Photo: NBU)

Ukraine’s recovery needs are immense. As of 31 December 2025, direct damage is estimated at US$195.1 billion, a 10.8 percent increase since the last assessment, according to the Fifth Ukraine Rapid Damage and Needs Assessment (RNDA5). Socioeconomic losses have reached $666.7 billion, while total recovery and reconstruction needs over the next decade are now estimated at $587.7 billion – nearly three times Ukraine’s 2025 GDP.

Resource scarcity, however, is no longer the primary bottleneck. Significant financing windows already exist through the state, the European Union, international financial institutions (IFIs), and bilateral partners. Rather, the critical challenge is whether this finance can be translated into high-impact investments at the required pace and scale. Too often, it cannot.

In fragile, high-risk environments, financing cannot follow a linear path from recovery to development. It must operate across a continuum where current investments stabilise systems and lay foundations for long-term transformation. This shifts the role of finance from merely funding projects to managing risk, uncertainty, impact and transition at scale.

Ukraine's experience demonstrates that the primary constraints are often delivery and absorption capacity. Many recovery projects remain stalled at the concept stage, requiring feasibility studies, costing, structuring, and alignment with financing standards. Simultaneously, local actors – including communities, municipal enterprises, and local businesses – often lack the technical, institutional, or financial capacity to prepare to the standards required by lenders and investors.

Unlocking finance in Ukraine thus requires more than additional funding; it needs systems that can move needs from ideas to actual investment.  This is where blended finance – integrated with de-risking and robust delivery systems – operates effectively in crisis and recovery settings, ensuring capital flows where and when it is most critical.

In Ukraine a clear lesson comes from the cooperation between UNDP and the European Investment Bank (EIB): Finance works best when integrated with technical assistance, implementation support, quality assurance, and risk mitigation. Under EIB-supported recovery programmes, UNDP has helped the Government of Ukraine absorb roughly  EUR 1 billion in loans while providing continuous technical assistance and quality assurance. This went far beyond advisory inputs to include engineering oversight, equipment procurement and installation support, financial monitoring, and anti-corruption safeguards. This has enabled municipalities to deliver over 120 rehabilitated public facilities across 19 regions.

The EIB District Heating Programme, for instance, demonstrates that technical assistance is a core component of the financing architecture, not an optional add-on. By narrowing the gap between available capital and bankable demand, it ensures approved funding translates into completed projects rather than stalled commitments.

This logic drives the Local Development Finance Facility (LDFF) developed by UNDP in Ukraine. Designed as a bottom-up platform, the LDFF starts with the realities of communities rather than pre-defined funding. It identifies local needs, aligns them with local plans and national priorities, and supports the preparation of the projects that have the strongest economic rationale.

This sequencing matters: Too often, recovery starts with available instruments and then searches for projects to fit them. Ukraine’s context demands the reverse: start with local demand, build a credible pipeline from the bottom up, and then match projects with appropriate financing. The LDFF embodies this by combining targeted technical assistance with financial de-risking instruments – such as interest rate subsidies – to make existing financing more viable in wartime conditions.  This approach is vital in areas where market barriers remain high, such as affordable housing, district heating, green transition investments, and MSME-linked local recovery.

These issues transcend Ukraine; many countries face similar barriers. While global capital exists, it does not automatically flow to where it is most needed, or produce results when it arrives. Without credible pipelines and risk-sharing mechanisms, financing commitments often remain disconnected from delivery.

Ukraine’s message for the Financing for Development Conference 2026 was clear: the bottleneck lies in the “missing middle” – weak pipelines and risk perceptions that deter investment at scale. A “360° financing loop” is essential, where bottom-up demand is systematically translated into investment-ready pipelines. In this model, blended finance is judged not by leverage ratios alone, but by its ability to transform intent into execution – turning commitments into bankable projects, and projects into tangible results.

Country platforms must go beyond aggregate funding to embed local feasibility and delivery capacity at their core. Ukraine’s experience proves that scale is built from the ground up through credible project preparation, trusted delivery systems, and financing architectures that internalise risk rather than externalising it.

Ultimately, the value of UNDP’s approach lies in its role as a system integrator – a bridge between high-level policy, local project pipelines, and international financing partners. By converting raw local demand into scalable, de-risked investments, UNDP ensures that recovery is not just a series of disconnected repairs, but a cohesive movement toward national transformation and EU integration. This model will help to build the permanent institutional strength Ukraine needs to manage its own future, and turn the “missing middle” into a robust engine for sustainable development.

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