By Alister Doyle
OSLO (Reuters) - The European Bank for Reconstruction and Development may make new investments in Ukraine that are riskier than usual, to help shore up an economy pounded by conflict with pro-Russian rebels, EBRD president Suma Chakrabarti said on Tuesday.
The development bank might, for instance, help municipalities in eastern Ukraine near a ceasefire line with the rebels to maintain public services such as transport, waste collection or street lighting, he said.
Such investments would normally be judged too risky under EBRD lending guidelines.
"A question I am raising internally is 'should we do projects at the more risky end of the spectrum, and increase our funding a bit?'," he told Reuters by telephone from a conference in Copenhagen about global green growth.
"The situation is really, really severe. This is a conflict-ridden economy," he said. The London-based EBRD expects the Ukrainian economy to contract by 9 percent this year.
"We haven't set a target but Ukraine will need a huge injection of funding ... over the next few years," he said.
The EBRD was set up in 1991 to help former Soviet nations in central and eastern Europe to become market economies. It has since expanded to include other nations from North Africa to central Asia.
The bank has said it aims to invest 1 billion euros (805 million pounds) in Ukraine this year. Kiev has also promised to do more to combat corruption.
The EBRD's website says it has made net investments of 9.2 billion euros in Ukraine in 329 projects. Among them are projects to restructure banks, modernise infrastructure and promote efficient energy use.
Chakrabarti said a decision by the EBRD board in July to bar new investment in Russia had freed funds for investment in other countries, including Ukraine, Poland, Turkey, Romania and Egypt. Last year, the EBRD lent Moscow 1.8 billion euros.
Ukraine in February drove out Moscow-backed President Viktor Yanukovich. Kremlin alarm at his ouster and the prospect of a shift towards the West by Kiev led to Russia's annexation of Crimea in March and provoked pro-Moscow separatist rebellions.
(Reporting By Alister Doyle; Editing by Larry King)