We should maximize the amount of private funding that comes in

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Interview with Alfonso Garcia Mora, IFC Vice President for Europe, Latin America and the Caribbean

What is your plan for Ukraine as IFC’s new Regional Vice President for Europe, Latin America and the Caribbean?

For IFC, Ukraine is a priority country in the region. The economic consequences of the ongoing war in Ukraine are global in nature and go beyond individual countries or even Europe. As the world’s largest private sector-focused development institution, we will be strategic to better define and increase the development impact of every project in the region.

Does IFC have experience working in a country at war?

Absolutely. Global in nature, IFC works in fragile and conflict-affected countries. We have worked in all regions – Africa, Middle East, Southeast Asia – during war and post-war periods.

With the ongoing war in Ukraine, are you going to suspend all investments or do you still have other options?

IFC continues to support existing clients with the working capital they need, especially in the midst of war. We are also exploring options to address short- and medium-term recovery efforts across all sectors. In this context, the agribusiness sector (e.g. grain warehouses) is critical given current and potential food security issues in the region as well as globally, for example in South Africa. North.

Given the war, what are your areas of intervention in Ukraine?

First, we try to think of solutions to support local farmers and grain producers. Secondly, we want to focus on the country’s energy sector, which is essential given the upcoming winter in Ukraine and heating needs, among others. As we try to explore how we can best help, beyond the short term, our top priorities in Ukraine include energy independence and energy security. Our third area of ​​work will include cities. The aim is to support Ukraine both at national and municipal level, which is what we did before the war. Since 2019, we have supported five municipalities, and this is something we would like to take back to Ukraine.

Affordable housing is another priority area, as 12 million Ukrainians have been forced to move within the country. Through the IFC’s energy efficiency program in coordination with the EU and Germany, which existed before the war, we are now trying to help rebuild the residential sector.

Please tell us more about IFC’s new project with the Horizon Capital Fund.

The key idea of ​​the Horizon project, which we are still discussing, is digitization, which will be essential to Ukraine’s recovery. Digitalization in particular can have a huge impact on the economy and job creation.

That’s why we focus on IT investments and entrepreneurship, as we find ways to support new entrepreneurs in the IT space with private equity.

IFC has experience managing the Ukrainian Energy Fund. Will you continue to manage this fund?

This is an important trust fund that we support together with the European Commission and the German government. As we continue to do this, we are in talks with donor partners to see if we can reallocate the fund to amplify its development impact and meet the urgent needs of Ukrainians, whose homes have been damaged.

Do you invest through the Energy Efficiency Fund?

It was not a direct investment because we channeled donor funding to invest in relevant areas. Our role was to coordinate donors and representatives of the European Union and German authorities to make the multi-family residential sector greener and more sustainable.

Recently, you talked about public-private partnerships (PPP) and cascading financing. Could you tell us more?

According to government estimates, Ukraine will need 750 billion dollars for the recovery plan. Public resources alone cannot cover this enormous cost. In theory, even if we manage to attract all international donors, it will not be possible to close this huge funding gap. This is where the private sector can play a key role, although we need to find ways to maximize private sector participation. At IFC, we believe that by prioritizing private solutions wherever possible and saving scarce public resources, it will be a good choice for Ukraine.

To achieve this, we have a methodical approach that we call the Cascade – a decision-making sequence that prioritizes private sector solutions. According to this cascade approach, private financing should be used where commercially feasible, in order to conserve scarce public resources.

When conditions will not support private investment, the second alternative is to use blended finance, concessional finance or PPPs where needed. This will help to divide funding and reduce risk for public and private sector actors. We believe that the PPP program will be fundamental to Ukraine’s recovery efforts.

The third alternative is to ensure that the public sector implements projects that are not commercially viable for the private sector or are more complex in nature. However, these three approaches differ in their own way and must be used judiciously depending on the nature of the projects.

What do you think of the recovery plan that the Ukrainian government presented yesterday, in particular of the recovery phase?

My first impression is that conceptually the program is very complete and good. The key will be on the implementation. Given the long and long list of potential projects, it will be essential to prioritize and pilot projects efficiently and adequately.

The Ukrainian government has said the stimulus package will require $750 billion. What is IFC’s potential role in bridging this gap?

It shouldn’t be specific numbers. Instead, we should maximize the amount of private funding that comes in. Given Ukraine’s limited resources, the private sector will play a key role. In such situations, IFC tries to bring together third parties and mobilize private capital. This is one of IFC’s main goals globally.

How has the quality of IFC’s loan portfolio changed since the start of the war?

IFC’s portfolio is doing well and we are monitoring carefully while making the necessary internal changes.


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