On the allocation of a subsidy for the implementation of projects under the ‘Ukraine Recovery Programme III’ in 2026

«Allocation of a subsidy for the implementation of projects under the ‘Ukraine Recovery Programme III’ in 2026. Analysis of the Government’s Resolution»

The Cabinet of Ministers of Ukraine has approved the allocation of a subsidy in 2026 for the implementation of projects under the ‘Ukraine Recovery Programme III’ (Cabinet of Ministers of Ukraine Order No. 52-r dated  21 January 2026). The projects in the public utilities sector are implemented with a loan from the European Investment Bank (EIB), secured by Ukraine in compliance with the Financial Agreement “Ukraine Recovery Programme” between Ukraine and the European Investment Bank.

The proposed allocation of the subsidy for 2026, by region, reflects the logic of the Government’s restoration policy, which takes into account the extent of damage, the security context and the readiness of communities to implement projects. What is important is not a mechanical allocation based on a formula, nor proportional funding for all regions, but rather the targeted allocation of resources to places where the state expects tangible and relatively rapid results.

Most notably, the largest amounts of funding are concentrated in Zaporizhzhia, Dnipropetrovsk, Kharkiv, and Sumy regions. Taken together, these regions account for a significant proportion of the total subsidy.

This proves that within the framework of the ‘Ukraine Recovery Programme III’, priority is given to territories which meet the following criteria:

1. have suffered significant damage or systemic disruptions to critical infrastructure;

2. remain functional in terms of governance and are capable of implementing complex infrastructure projects in conditions of military risk.

Zaporizhzhia region received the largest amount of funding, which is objectively linked to the large-scale problems of water and heating supply, energy security, and the need to support basic social services in communities operating under constant threat. A similar pattern is evident in Kharkiv and Dnipropetrovsk regions, where significant sums have been allocated not to small-scale projects but to systemic engineering solutions.

Meanwhile, the example of Sumy region speaks for itself: the amount of the subsidy there is less than that received by the three largest recipients, but significantly exceeds the funding allocated to many other regions. This indicates the existence of specific, well-prepared projects that have passed the selection process and can be implemented within the specified timeframe. This means that in this programme, the readiness of a project plays no less a role than the extent of the damage.

Regions in central and western Ukraine generally received moderate or small amounts of funding. This does not imply a lack of needs, but reflects a different nature of requests – predominantly local projects, the modernisation of individual networks or facilities, rather than large-scale restoration after mass destruction. In such regions, the subsidy serves more as a targeted reinforcement tool than as a primary source of restoration.

Special attention should be paid to the modest level of funding allocated to Kherson region. At first glance, this may seem illogical given the scale of the destruction. However, in this case, the key factor is the limited ability to implement projects under secure conditions, as well as the specific legal status of certain territories. This confirms that the Government has acted cautiously in this tranche, focusing on projects where there is a realistic chance of completion.

In general, the allocation of the subsidy shows a shift towards a pragmatic model of restoration, where the state does not attempt to ‘distribute equally to all’, but instead invests resources in those communities and regions that can turn funding into tangible infrastructure outcomes. This approach reduces the political appeal of the decision but enhances its economic and managerial viability. The projects funded by this grant include:

• 39 healthcare facilities;

• 18 water supply, sewerage, and heating facilities;

• 76 general secondary schools and pre-school educational institutions;

• 6 administrative service centres (ASC).

It is also important to realise that this allocation is not a final ‘balance of fairness’ between regions. It reflects a specific stage of the Programme and a specific list of projects approved for funding in 2026. For communities that did not receive funding in this tranche or received minimal amounts, the key task remains the preparation of quality projects and passing the selection process in subsequent funding cycles.

In this context, a revised approach to compiling the list of territories where hostilities are currently taking place or have taken place, or which have been temporarily occupied, becomes particularly important. Giving communities the opportunity to request inclusion on this list creates a legal basis for justified access to state restoration programmes, including such subsidy schemes. This procedure is established by amendments to Resolution of the Cabinet of Ministers of Ukraine No. 1364 ‘Certain Issues Concerning the Compilation of a List of Territories Where Hostilities Are (Were) Taking Place or Which Are Temporarily Occupied’. This resolution has established a mechanism whereby communities can independently initiate the inclusion of their localities in the official list of affected territories, which in turn affects their right to access state resources, including subsidies for restoration. A dedicated commission on the compilation of the list will begin work at the Ministry for Development, which will consider proposals from communities if these have not been taken into account at the level of regional administrations.

In terms of the allocation of funds, this is essentially about more than just the restoration of individual facilities. Through this allocation, the state is, in a sense, testing the extent to which communities are prepared to operate under a results-based accountability system. Funds are directed not only where there is a need, but also where there is the capacity to complete the project and ensure its continued operation.

This is precisely what distinguishes the current approach from previous practices, when the main indicator was budget use. For communities, this means a change in role: the subsidy is no longer ‘aid from above’, but a tool that must be justified, implemented, and kept in operation. For the state, this is a way of concentrating limited resources where they have a practical impact on people: stable services, basic security, and minimum conditions for living and working, even in difficult regions.

If these projects are completed efficiently and on schedule, this approach is likely to become the standard for the next stages of restoration. If not, the issue will not be the level of funding, but the management decisions taken at the local level.

The DECIDE project is implemented by NGO DOCCU and PHZH International Projects in Education with the support of the Embassy of Switzerland in Ukraine.