Switzerland signs controversial reconstruction aid package for Ukraine

The then Swiss President Viola Amherd (right) and Ukrainian Prime Minister Denys Shmyhal (left) talk during a bilateral meeting at the Ukraine Mine Action Conference in Lausanne in October 2024. Keystone / Jean-Christophe Bott

Switzerland signed a bilateral agreement with Ukraine on July 10, during the Ukraine Recovery Conference held in Rome. The agreement, which includes binding contracts for the involvement of Swiss companies in Ukraine’s reconstruction, has been widely criticised.

The agreement establishes a legal framework for Swiss private sector participation in the reconstruction and recovery of Ukraine.  The Swiss government has committed to allocate a total of CHF1.5 billion ($1.9 billion) to the cause, with CHF500 million specifically designated for Swiss private companies.

The conference, held July 10 and 11, brought together 100 official delegations, along with 40 international organisations and development banks.

The bilateral agreement is “an important step for the closer involvement of Swiss companies in Ukraine’s recovery”, said Jacques Gerber, the Swiss Federal Council delegate for Ukraine at the signing ceremony.

Today at #URC2025External link, I had the honour to sign a bilateral agreement with 🇺🇦 @Svyrydenko_YExternal link to strengthen cooperation on reconstruction. The agreement allows Ukraine to procure 🇨🇭 goods & services — an important step for the closer involvement of CH’s companies in UA’s recovery. pic.twitter.com/938gEEQ49fExternal link

— Jacques Gerber (@jacquesgerberch) July 10, 2025External link

The agreement will be financed through Switzerland’s international cooperation funds, managed by the Swiss Agency for Development and Cooperation (SDC) under the umbrella of the foreign ministry. It forms part of a 12-year reconstruction plan for Ukraine that was initiated in 2022.

The plan has drawn criticism both domestically and internationally. Critics argue that Bern is diverting funds intended for international cooperation and assistance – a concern heightened by recent deep cuts to Switzerland’s overall foreign aid budget.

Furthermore, the agreement stipulatesExternal link that Ukraine must submit a list of goods and services based on its reconstruction needs, which it requires from Switzerland. These goods and services will be procured from Swiss private companies.

This approach, known as “tied aid”, has been progressively phased out of foreign aid contracts and development cooperation since the 1980s. Tied aid is widely seen as less effective because it tends to prioritise donor country interests over recipient needs and reducing overall aid impact.

“Swiss development cooperation is reverting to a bad practice that it abolished in the 1980s,” says Laurent Matile, a senior adviser at Alliance Sud who previously worked at SECO.

The agreement still requires ratification by the Swiss parliament. No date has yet been set for the vote.

Support for Ukraine at the expense of others?

Switzerland positioned itself at the forefront of international recovery efforts in Ukraine as early as 2022 by organising the first Ukraine Recovery Conference in Lugano. The conference established the Lugano Principles, which emphasised a “whole-of-society” approach to recovery by involving not only governments and international organisations, but also the private sector.

Ukraine’s recovery needs include rebuilding infrastructure, clearing landmines and cleaning up the environment. According to statisticsExternal link published in December 2024 by the Ukrainian government, the World Bank Group, the European Commission and the United Nations, the total estimated cost of Ukraine’s recovery and reconstruction over the next decade is $524 billion (CHF417 billion).

In 2023, Switzerland pledged CHF100 million to support demining and recovery efforts in Ukrainian civilian areas. According to the Center for European Policy Analysis (CEPA)External link, Ukraine is now the most heavily mined country in the world, with landmines affecting 40% of its territory.

Reconstruction vs. recovery

Recovery involves restoring livelihoods, social stability, and the overall well-being of the Ukraine population. Reconstruction focuses on rebuilding physical infrastructure including roads, energy systems, etc., and assets damaged or destroyed by the war. Reconstruction is part of recovery.

Last summer, Switzerland further increased its support for Ukraine’s recovery, announcing thatExternal link “Switzerland’s private sector should play a key role in Ukraine’s recovery efforts,” and committing CHF5 billion over 12 years from 2025. The first tranche of CHF1.5 billion will be allocated between 2025 and 2028, with CHF500 million specifically earmarked to involve the Swiss private sector.   

This announcement comes at a sensitive time for Switzerland.

In December 2024, the Swiss parliament voted to cut international cooperation funding by CHF110 million for 2025 and CHF321 million for the period 2026–2028. While Switzerland does not disclose its total annual foreign aid budget, parliament has capped overall spending at CHF11.27 billion for 2025 to 2028. Of that amount, 15% is earmarked for Ukraine’s recovery.

This means that “Switzerland is not allocating additional money but rather reducing support to other countries in order to assist Ukraine,” said Kristina Lanz, an expert on international cooperation at Allianz Sud, the umbrella organisation of the six leading Swiss Development NGOs.

SECO justified using development cooperation budget to fund private companies on the basis that the projects must have a “development impactExternal link” such as providing vocational training programmes that can improve the employability and income of young people in the recipient country.

Lanz says that Switzerland’s support for Ukraine “should be in addition to – rather than at the expense of – its support for other countries”. She argues that private investment should be mobilised through other policy instruments without providing more detail.

Controversial over ‘tied aid’

The agreement also puts controversial “tied aid” clauses back in the spotlight. This marks a reversal of Switzerland’s long-standing foreign policy of providing official development assistance without conditions – meaning its aid isn’t tied to the procurement of goods and services from Switzerland.

Popular some 40 years ago, tied aid was progressively abandoned amidst international criticism which blamed these clauses for inflating the cost of goods and services to the recipient country. StudiesExternal link demonstrate that these can be 15-30% more expensive on average compared to unconditional aid.

The assistance model promoted by Switzerland in Ukraine’s reconstruction and recovery differs significantly from many similar initiatives. For example, last June, the EU signed €1.4 billion worth of new guarantee and grant agreementsExternal link to benefit Ukrainian private companies. The funding aims to improve businesses’ access to finance, enable them to invest in production capacity, and assist with the restoration of operations and relocation from conflict zones.

The European Union has also provided substantial support to Ukraine, including a macro-financial assistance package worth up to €35 billion. This loan is to be repaid using profits generated from frozen Russian state assets in the EU. This funding is intended to address Ukraine’s urgent budgetary needs, and to support Ukraine’s military and reconstruction efforts. The loan is undesignated, enabling Ukraine to allocate the funds as it sees fit.

Although Ukraine has a say in the design of the Swiss bilateral treaty, which stipulates that the country will identify its reconstruction needs and submit a list of goods and services that it requires from Switzerland, “it has no choice regarding the type of support it will get,” wrote Lanz and Matile in a commentaryExternal link published on the website of Allianz Sud.

“Tied aid, by definition, reduces the recipient country’s freedom of choice and ownership, and carries the risk of driving Ukrainian companies out of the market, which is contrary to the principles of effective economic aid,” Matile told Swissinfo.

In its statement,External link the Swiss government emphasised that sectors like energy, transport, machinery, construction, water supply, and disaster prevention are critical to Ukraine’s reconstruction –  and are areas where Swiss companies offer strong expertise.

According to OECD dataExternal link, 97.3% of Swiss development aid is currently untied, a figure well above the OECD Development Assistance Committee average of 79.9%.

However, in a peer review report on Swiss development cooperationExternal link published in June, the OECD Development Assistance Committee explicitly criticised Switzerland for its tied aid clauses in its plans to support reconstruction in Ukraine.

The “planned partially tied aid programme for Ukraine risks undermining Switzerland’s standing”, the report stated. It stressed that “Switzerland should ensure that its upcoming programme in Ukraine is untied”.

When asked why the Swiss government chose to adopt this approach in its assistance to Ukraine, Markus Spörndli, the communications advisor to the Federal Council’s delegate for Ukraine told Swissinfo that the situation in Ukraine is “a special case”, drawing a parallel with the Marshall Plan, a US initiative launched in 1948 to provide economic aid to Western Europe after the Second World War.

Spörndli added that untied development aid remained the rule for Swiss development cooperation.

Should Switzerland do more?

The conference follows the United States’ decision to cut its humanitarian aid to Ukraine in March, shifting more of the funding burden onto European countries.

Scandinavian nations and the United Kingdom have significantly increased their support to Ukraine, according to the latest updateExternal link of the Ukraine Support Tracker by the Kiel Institute for the World Economy in Germany.

As of May 31, 2025, Switzerland has provided around CHF5.16 billion to support the Ukrainian population, including refugees in the Alpine nation.

In terms of total bilateral aid, it ranks 18th out of 41 countriesExternal link in the Kiel Ukraine Support Tracker, with government allocations of €935 million (CHF870 million). However, when considering bilateral aid as a percentage of donor GDP, Switzerland ranks 27th.

“Switzerland could, and should do more to support Ukraine,” says Lanz.

In March, proposals to link aid to Ukraine to economic performance measured in terms of GDP, were rejected by the Swiss House of Representatives.

Edited by Virginie Mangin/ds