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Reconstruction in Ukraine: What can we learn from the Afghanistan experience?

Reconstruction in Ukraine: What can we learn from the Afghanistan experience?

Written by

Kristin Laub, Sinéad Dwyer

Published on

June 21, 2023

In addition to the immeasurable trauma, injury, and loss of life, the first year of Russia’s war of aggression in Ukraine resulted in more than US$135 billion worth of direct damage to civilian infrastructure and housing. In the past months, as the war continues, the damage has intensified including through the destruction of the Kakhovka Dam. According to an estimate by the World Bank, Government of Ukraine, EU, and UN, more than US$411 billion is needed between 2023-2033 to finance reconstruction and recovery efforts. Of this, US$14 billion is urgently needed for critical investments, such as energy restoration, housing, and core infrastructure.

How the international community will support the cost of Ukraine’s reconstruction and recovery is difficult to predict. If a substantial portion of the costs were to come from donors' ODA budgets, as has already been the case with Ukrainian in-donor refugee costs, this could cause trade-offs with other development priorities. This creates risks, of which advocates should be aware.

Looking at another country’s recovery, reconstruction, and donor support in the context of conflict, can give some indication of how ODA budgets might shift in support Ukraine’s reconstruction. This piece looks at the war in Afghanistan as a major, recent conflict in which there was significant international support for reconstruction and recovery. Despite clear differences in their level of economic and political development and the causes and types of conflict, it points to some insights on what donor support for Ukraine’s reconstruction could look like.

Timeline and scale of support to Afghanistan

When did donor funding for reconstruction start?

Bilateral ODA to Afghanistan increased significantly in the first year of the conflict. The conflict started on October 7th, 2001, and in that year ODA reached US$800 million, up from a very low base of US$100 million in 2000. It grew steadily throughout the conflict reaching a record high of US$6.3 billion in both 2010 and 2011. With a fall in troop levels in 2011, bilateral ODA started to decrease, but political attention and support have never reverted to pre-war levels. 20 years later, funding levels remain about 25 times higher than pre-war levels. This extended funding likely relates to the prolonged nature of the conflict and the significant time it takes to rebuild a country.

Sources of funding to Afghanistan

What was the role of ODA in supporting Afghanistan reconstruction?

Before the war, the Afghan government received much of its revenue from foreign assistance as opposed to domestic sources, such as taxes. Over the course of the war, Afghanistan dependence has shifted, but it continues to rely on foreign assistance, with ODA accounting for 114% of Afghan's central government expenses in 2001 and decreasing to about 51% by 2017. This change is due to an increase in revenue from direct and indirect taxes, and from the sale of goods and services.

Who were the key donors providing ODA to Afghanistan?

Given the US invasion in Afghanistan and its ongoing geopolitical interest in the country's stability, it is not surprising that the US has been the largest donor of bilateral ODA to Afghanistan over the past 20 years, providing 52% of total funding. This ODA was provided as part of a larger package of support led by US Provincial Reconstruction Teams, consisting of military officers, diplomats, and reconstruction experts. In light of the US' large investment in Afghanistan, the US Congress created the Office of the Special Inspector General for Afghanistan Reconstruction (SIGAR) in 2008 to provide independent and objective oversight of Afghanistan reconstruction projects and activities.

30% of ODA funding from 2001 to 2021 came from four other G7 members (Germany, UK, Japan, and Canada), meaning that more than 80% of total funding to Afghanistan came from only five donors. Those donor countries also engaged in organizing and promoting support for reconstruction and recovery in Afghanistan, with Germany, Japan, and the UK all hosting conferences on the issue. A major objective of the funding and engagement of these G7 nations was to ensure political stability in Afghanistan and contain and prevent a resurgence of terrorism.

Most donors, especially the US, Norway, Sweden, and Japan, also supported Afghanistan's reconstruction and recovery through contributions to funds, especially the World Bank Afghanistan Reconstruction Trust Fund, and multilaterals, such as the World Food Programme.

Uses of funding in Afghan reconstruction

Which sectors did the funding go to?

The 20-year conflict in Afghanistan led to a humanitarian crisis, severely damaged infrastructure, and destabilized institutions. Accordingly, donor support focused on humanitarian assistance, restoring political stability, recovery of economic and social sectors, as well as reconstruction of infrastructure.

In the first years of the war (2001-2003), the largest share (24-48%) of bilateral ODA went to 'emergency response,' providing funding for shelter, water, sanitation, education, health services, and assistance delivered or coordinated by international civil protection units. Emergency funding decreased from 2004 on as bilateral ODA to other sectors with a longer-term focus increased. This includes 'government & civil society,' 'conflict, peace & security,' 'transport and storage,' and 'agriculture.'

Since 2007, 'government and civil society' received the largest share of bilateral ODA by far, accounting for up to 40-45% of all bilateral ODA in some years. Funding to this sector only started to increase a few years after the beginning of the war, presumedly in line with a shift from ad-hoc international assistance to donor assistance with longer-term strategic goals, and the increasing political instability in Afghanistan. Within this sector, core public and justice sector management capacities received the most funding, reflecting major donors' focus on restoring political stability and containing and preventing a resurgence of terrorism in Afghanistan.

Reconstruction in Afghanistan was determined by donor interests, especially those of the US. The US was criticized for providing funding based on the policy interests of American society as opposed to conditions on the ground in Afghanistan. SIGAR criticized that funding was spent too quickly and focused on short-term goals, leading to spikes in funding, which Afghanistan was not able to effectively absorb.

What could we expect in Ukraine?

Timeline and scale

Reconstruction support for Afghanistan started within one year of the war – we see that already happening in Ukraine

Donors' financial contributions to Ukraine's recovery and reconstruction have already started even though the end of the war is not in sight. DAC donors contributed US$52 billion to Ukraine in 2022, of which US$16.7 billion was counted as ODA (this excludes military support). This equates to an increase in ODA funding of about 17 times relative to 2021.

Support for Afghanistan climbed steadily and peaked a decade after that conflict began – ODA funding to Ukraine is likely to rise at least in the short term

This implies that, more than one year into the war with Ukraine, ODA funding will likely continue to rise in the coming years as donors shift from providing emergency humanitarian support to funding larger, longer-term reconstruction projects.

At its peak, ODA to Afghanistan accounted for 6% of bilateral ODA - according to the OECD’s preliminary 2022 data, already 8% of bilateral ODA is going to Ukraine

The relatively large scale of ODA that went to Ukraine in the first year of the conflict suggests that there are significiant risks of trade offs between Ukraine reconstruction and other development priorities. This will become more pronounced if ODA to Ukraine continues to rise in the next years and if donors do not increase their ODA budgets.

20 years later, funding to Afghanistan is still elevated – political attention and funding for Ukraine may not to decline for decades

As the war in Ukraine continues, ODA to Ukraine will likely steadily increase and not return to pre-2022 levels (US$987 million) for a long time.

Sources of funding

Funding to Afghanistan was dominated by donor interests, particularly those of the US – there are promising signs that reconstruction and recovery efforts in Ukraine will be more country-led, as Ukraine has developed its own recovery plan needs assessment and we see closer collaboration with donors

The Ukrainian government has already developed a National Recovery Plan that covers the next 10 years, and, together with the World Bank, has assessed the scale of reconstruction needs. Ukraine's plan focuses on providing resilience during the war, recovery of crucial economic and social sectors and the natural ecosystem, promoting modernization, and sustainable economic growth. A multi-agency donor coordination platform, including Ukraine, G7 countries, the EU, and financial institutions, was set up in January 2023 to support these efforts. It is expected that donors will leverage cost estimates and Ukraine's Recovery Plan in their funding decisions, hopefully resulting in ODA flows to Ukraine that are better tailored to needs and abilities on the ground than what we saw in Afghanistan.

Uses of funding

Funding shifted from emergency response to long-term recovery in Afghanistan – we might expect the same in Ukraine

Depending on how the war in Ukraine continues to unfold, we can expect a similar shift from emergency response to long-term recovery over time. Given the different types and degrees of damage caused by the war in Ukraine compared to Afghanistan, different sectors might be prioritized. According to the Word Bank, the highest estimated needs for reconstruction in Ukraine are in the transport, housing, and energy sectors. However, for both Ukraine and Afghanistan, agriculture is an important economic sector and receives a large share of ODA. The agricultural sector will also likely be prioritized by European donors as Ukraine is a major source of wheat for markets in European and sub-Saharan Africa.

Focus of funding in Afghanistan was on political stability - sector composition may be different based on donor and private sector interests in Ukraine

The largest share of funding to Afghanistan went to support the government and civil society, which might not be the case in Ukraine, given its higher political stability. The Ukrainian economy has a large focus on the IT sector and wants to pursue a green recovery, therefore, these sectors and issues might be prioritized in donor funding decisions. A significant share of the needed investments, especially the infrastructure and production sectors, could come from private finance instead of ODA, since these are more likely to yield return on investments for private investors.

What should advocates look out for?

Ukraine faces significant funding needs and is relying on the support of the global development community and the provision of ODA more than ever. This was already visible in the ODA support donors provided to Ukraine in 2022 and, based on the experience in Afghanistan, may intensify in the next years. Given that ODA budgets are constrained and that the war in Ukraine is not the only crisis that the development community is facing, this creates significat risks that there will be trade offs.

To mitigate this risk, advocates should be aware of the scale and critical nature of ODA going to Ukraine, alongside the necessity to maintain support for other crises in LMICs - in particular, the interconnected food, climate, health, and economic crises that continue to put the world’s most vulnerable at risk. Advocates should encourage donor governments to supplement Ukraine reconstruction efforts with new and additional ODA funding to ensure that it does not cause direct trade offs with funding for other essential development efforts.

Kristin Laub

Kristin Laub

Sinéad Dwyer

Sinéad Dwyer

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