Ukraine receives USD 750 mln from World Bank

Ukraine signed an agreement with the International Bank for Reconstruction and Development (World Bank Group) for a loan of about USD 750 mln to implement strategic and institutional reforms, as well as stabilize the financial situation. The loan was arranged for 16 years with a one-time commission (0.25%) and a six-month LIBOR+variable spread interest rate.

Alexander Paraschiy: The USD 750 mln is the first part of USD 1.48 bln in support that was approved only a few days ago by the World Bank’s board of executive directors. This part of the loan will be allocated towards high-priority reform measures to address the key structural roots of the current economic crisis in Ukraine. On the top of that, USD 382 mln is earmarked to be spent on energy efficiency projects and USD 350 mln is to be allocated on infrastructure projects. These contracts will be signed shortly most likely.

The good news about the funds is not only foreign currency inflow (the funds will be spent internally, thus improving the situation at the ForEx market) but also the quality of the investments. Infrastructure and energy efficiency projects are the very initiatives that are badly needed for the country and, if successful, will translate into a faster economic recovery in the mid-term. The only risk with the loan is the internal corrupt environment: if the new authorities will not succeed in cleaning up corruption at state bodies, the money simply will not be spent properly, as has happened quite often with earlier World Bank loans to the government.