Ukraine’s Finance Minister Natalie Jaresko and Qimiao Fan, the Country Director of the World Bank for Ukraine, Belarus and Moldova, Europe and Central Asia have signed a loan agreement worth USD 500 million to finance the Second Programmatic Financial Sector Development Policy Loan in Ukraine The World Bank’s Board of Executive Directors approved a USD 500 million loan for Ukraine yesterday. This new financing supports a number of high-priority reform measures in the banking sector in response to the financial crisis in Ukraine.
“Bringing back stability and economic growth to Ukraine will only be possible if the country stays on the path of reforms,” said Mr.Qimiao Fan. “Our new operation will help this goal by supporting a number of measures to stabilize the country’s financial sector and create a healthier banking sector. Timely implementation of banking sector reforms is needed to help revive credit to the real economy, which is key for financing the recovery.”
Speaking at the loan agreement signing ceremony, Natalie Jaresko said this new agreement with the World Bank is much more than just a loan provided on beneficial terms for Ukraine. This loan is one more step to enhance the financial stability of our country and to recover its economy. It will help us return to economic growth, improving employment and increasing the social standards for our citizens,”
In particular, reform measures supported by this loan – the second in a series of two – will strengthen the capacity of the Deposit Guarantee Fund to ensure that it can adequately perform its critical bank resolution and insured deposit payout functions in the case of bank failures.
The loan will also help stabilize the banking sector through conducting diagnostics of the country’s largest banks and implementing recapitalization and restructuring plans for those banks that are found to be undercapitalized. Finally, this operation will support legal and institutional reforms necessary to improve the resilience and efficiency of the banking system in the medium to longer term, particularly, focusing on limiting related-party lending in the banking system.
“The Ukrainian authorities have taken some impressive steps to stabilize and reform the economy and we are now seeing tentative signs of stabilization,” said Mr. Qimiao Fan. “However, because the challenges are so unprecedented, it is critical that the authorities continue to accelerate the pace of reforms.”
Speaking of the new operation, Valeria Gontareva, Governor of the National Bank of Ukraine, praised the cooperation with the World Bank. “In these challenging times, it is very important that we continue our fruitful cooperation aimed at implementing the next stage of the banking sector stabilization reforms,” she said.
This operation is part of the World Banks broader financial support package announced in February this year, which aims to provide Ukraine with up to USD 2 billion in 2015. With the approval of this operation, the World Bank will have delivered USD 1.215 billion to Ukraine in 2015, including USD 1 billion in direct budget support.
The World Bank is a major development partner of Ukraine. With this new budget support operation, the Bank’s current financial support to the country amounts to about USD 4 billion. Development policy operations support critical reforms recently undertaken by the government, and the current Bank's portfolio of investment projects are improving basic public services that directly benefit people of the country, such as water, sanitation, heating, power, roads, social assistance programs and health services.
Since Ukraine joined the World Bank in 1992, the Bank’s financial commitments to the country have totaled over USD 9 billion on projects and programs.