UK aid to Ukraine has been fast, flexible and responsive but post-war reconstruction will need careful management

30 Apr 2024

• ICAI finds the UK mounted an effective and flexible civilian aid response to the crisis in Ukraine, including bilateral aid of £228m and a 5-year commitment of £4 billion in loan guarantees.
• Strong efforts to ensure aid reaches vulnerable groups such as the elderly, women and those with disabilities.
• More humanitarian aid should be channelled through Ukrainian civil society organisations, watchdog says.
• UK has sought support for Ukraine from other countries and the private sector, including through the Ukraine Recovery Conference in London.
• ICAI warns the UK aid programme must prepare for and manage corruption risks, especially with post-war reconstruction.

The UK mounted a rapid and effective aid response after the full-scale Russian invasion of Ukraine in February 2022, but corruption remains a significant risk to future reconstruction, a new report from the aid watchdog finds today (Tuesday 30 April).

Alongside the UK’s military assistance, the civilian aid response spent approximately £228 million on bilateral aid in Ukraine in 2023-24, making it now the UK’s largest country programme. The UK also agreed to provide $5 billion (£4 billion) in guarantees, as part of an international package to enable Ukraine to access World Bank lending – meaning the UK agrees to pay should Ukraine default on these loans.

The guarantees enable Ukraine to continue to fund public services and social programmes. The Foreign, Commonwealth and Development Office (FCDO) currently imposes a 25% single country risk-adjusted exposure limit for loan guarantees – meaning one country shouldn’t receive more than 25% of the UK’s loan guarantees globally – but an exception has been made for Ukraine, which now accounts for 82%.

The Independent Commission for Aid Impact (ICAI) review found that the UK’s swiftly mobilised humanitarian assistance – including medical supplies and donated ambulances, food and support packages for displaced refugees – was rapid, flexible and well-targeted.

The loan guarantees have also been critical in allowing Ukraine to continue to function as a state and withstand the pressures of war, the report adds. However, these come with large contingent liabilities which pose risks to the wider UK aid programme in future years should Ukraine be unable to repay the debt.

ICAI also notes that high risks of fraud and corruption commonly found in reconstruction efforts pose a threat to Ukraine’s long-term recovery and will need careful management by the UK and other countries.

ICAI Commissioner Sir Hugh Bayley, who led the review, said:

“The UK has delivered an impressive humanitarian response to the full-scale Russian invasion of Ukraine, mobilising aid swiftly to meet Ukraine’s needs. Ukraine’s civil society groups have been essential to aid delivery and more UK aid should be channelled through them.

“UK loan guarantees have provided much greater support than traditional aid funding would allow, although this brings a large longer-term financial risk. Corruption also remains a significant issue in Ukraine, especially for reconstruction contracts, and the UK must address these risks in its plans to support Ukraine to rebuild.”

With a third of the Ukrainian population displaced by the war and 17 million people in need of humanitarian assistance, ICAI found that the Foreign, Commonwealth and Development Office (FCDO) acted quickly following the full-scale invasion, giving aid to trusted partners who could establish a swift response to the crisis. The watchdog praises the UK’s proactive approach to ensuring vulnerable groups such as the elderly and those with disabilities were supported, through identifying gaps and providing specific contributions for these groups.

ICAI reports that civil society groups in Ukraine play a crucial part in the delivery of humanitarian assistance and found a need for improvements in how the global community, including the UK, works with and funds these groups. Some local organisations told ICAI that strict conditions attached to international aid made it difficult for them to access the funds they needed.

On preventing fraud and corruption, the report found FCDO had correctly identified the risk of aid being diverted from its intended purpose as being high in Ukraine – as would be expected in such a context – but was limited in its ability to monitor these risks due to capacity of the team and security constraints, relying heavily on organisations such as the World Bank’s audit processes.

The aid watchdog also found that the UK’s efforts to support Ukraine have been based on significant engagement with the country’s government, deep knowledge of the national context and expertise drawn from other operations around the world over the last 20 years. Ukraine’s stabilisation and emergence from the war as a thriving, democratic country is a key foreign policy priority for the UK and its Partnership Fund for a Resilient Ukraine (PFRU) has helped build Ukrainian resilience and remain adaptive in the changing environment.

The report notes that the breadth of UK aid to Ukraine has balanced the UK’s strategic objectives with Ukraine’s evolving needs. Many activities reflect the UK’s commitments in its recent White Paper on International Development, including the inclusion of women’s organisations in long-term reconstruction planning and support for human rights, the rule of law and investigative assistance for war crimes accountability.

The Ukraine Recovery Conference, hosted in London in June 2023, generated an impressive amount of energy around looking ahead to Ukraine’s reconstruction and the involvement of private sector investment, but with the conflict still ongoing some private sector stakeholders ICAI spoke to suggested a focus on emergency needs such as infrastructure repairs was more realistic in the short term.

ICAI makes the following recommendations:

Recommendation 1: FCDO should intensify its support for localisation of the coordination and delivery of the humanitarian response in Ukraine.

Recommendation 2: The design of future FCDO programmes should encompass programming options for different scenarios and the ability to adapt quickly when circumstances change.  

Recommendation 3: FCDO should strengthen its third-party monitoring and audit arrangements in Ukraine by adding specialist capacity to identify and investigate fraud, corruption and diversion risks to UK aid (including guarantees) across the country portfolio.

Recommendation 4: Based on lessons from other post-conflict settings, FCDO’s new anti-corruption programming should include a focus on helping Ukraine’s independent anti-corruption bodies to identify and manage corruption risks associated with large-scale reconstruction.