Whenever the war ends, the monumental task of rebuilding Ukraine begins.

The longer the war in Ukraine goes on, it risks causing a significant global economic slowdown, higher levels of inflation, and a rise in poverty levels. According to the UN, approximately one-third of Ukrainians have been displaced. The war has also caused the death or injury of over 16,000 civilians, with the actual death toll believed to be even higher. The Kyiv School of Economics estimates that the war has destroyed at least $127 billion worth of national buildings and infrastructure.

The economic repercussions of this conflict have reverberated across various global channels. The conflict is both a humanitarian and economic calamity, with its impact being felt worldwide and the potential for it to worsen. Both Russia and Ukraine are key exporters of wheat, maize, and sunflower oil, and the disruptions caused by the war have led to higher global food prices. The war’s influence will be felt in three key areas.

Increased commodity prices, such as food and energy, will continue to drive up inflation, reducing income value and impacting demand. Neighboring economies will face disruptions in trade, supply networks, and remittances, along with an unprecedented influx of refugees. Finally, weakened business confidence and increased investor uncertainty will exert downward pressure on asset values, tighten financial conditions, and potentially lead to capital outflows from emerging markets.

Following Russia’s invasion of Ukraine, various countries have imposed severe economic sanctions on Russia. Economic sanctions will impact global supply chains and trade, as companies will struggle to establish finance channels for transactions with Russia. Additionally, damage to Ukrainian ports may worsen existing supply chain issues.

Global supply chains will continue to face disruptions from two interrelated issues. Land-based trade routes between Europe and Asia will face disruption as transit through Russia becomes more difficult or impossible due to compliance, reputation, or safety concerns. Another problem facing supply chains is the fact that some European countries have blocked their airspace to Russian cargo planes. Although Russian airspace is currently closed to 36 nations, certain carriers discourage shipping overland goods between Europe and Asia. The war will further reduce global air cargo capacity and raise air freight prices as freight forwarders will be compelled to take longer routes and incur higher fuel costs.

Despite the fact that the war shows no signs of stopping anytime soon, Ukraine is already planning for its post-war future and seeking assistance from private investors. More than 400 global corporations have pledged to aid in the reconstruction of Ukraine’s war-torn economy. Companies such as Citi, Sanofi, and Philips have signed the Ukraine Business Compact, indicating their intention to increase investment in the nation. The UK government has also announced a package of assistance for Ukraine, including $3 billion in fresh guarantees to release World Bank loans and £240 million in bilateral aid. Furthermore, U.S. Secretary of State Antony Blinken announced that the U.S. would provide Ukraine with an additional $1.3 billion in financial support to “overhaul its energy grid” and upgrade other essential infrastructure.

Ukraine faces a substantial funding challenge that governments and development finance institutions alone cannot solve. The World Bank estimated in March that the cost of rebuilding the country would amount to $411 billion, a figure expected to rise as the conflict persists. The Ukraine Development Fund is seeking concessionary financing from governments and development banks, which it will use to attract private investment. Concessionary capital is provided on more favorable terms, such as debt issued at below-market interest rates or equity from investors seeking lower returns.

The overarching goal of the rebuilding process should be to modernize Ukraine’s economy and society, not only in terms of infrastructure but also its economic, political, and social institutions. This will mark a significant departure from Ukraine’s Soviet history and pave the way for its eventual accession to the European Union. Several proposals emphasize the concept of “building back better.”