Ukraine attracts USD 0.3 bln loan for fiscal reform

Ukraine has attracted USD 331 mln under a new loan agreement with Japan on the DPL II (Development Policy Loan) from the World Bank and for the implementation of economic reforms, reported the Interfax news agency on March 25, citing the Finance Ministry web site. The credit was granted by the Japan International Cooperation Agency, the site said. The funds will go to the budget’s general fund and will be used to implement structural reforms that include the creation of an electronic system of VAT administration, strengthening control mechanisms over tax revenue and spending, and other mechanisms. The loan was provided for 20 years with a six-month grace period. The interest rate equals Libor plus 0.05%.

Alexander Paraschiy: This loan is the first wire Ukraine has received from international donors since September 2015. It’s positive but we can hardly read this as a signal of the readiness of Western partners to unfreeze large-scale support. Most likely, it was an exceptional decision amid an overall skeptical perception globally of the unfolding political crisis. Previously, we anticipated nearly USD 10 bln from Western partners in 2016, which would include USD 5.8 bln from the IMF, EUR 1.2 bln from the EU and USD 1.0 bln in Eurobonds under U.S. guarantees. The inflow should have secured gross international reserves rising to USD 20 bln.  However, reserves will conclude the year much lower against the backdrop of the prolonged political crisis.