Ukraine gains USD 300 mln macrofinancial loan from Japan

The Ukrainian government and the Japan International Cooperation Agency (JICA) signed an agreement on a second development policy loan worth around USD 300 mln, according to the Interfax-Ukraine news agency on Dec. 4. “The loan aims to increase the efficiency and transparency of the public sector, deregulation and improvement of conditions for doing business,” Finance Minister Natalie Jaresko said after signing the agreement. One of the loan’s elements is the reform of inefficient utility subsidies, JICA representatives said, as reported by Interfax. Technical assistance to new agencies to fight corruption will be additionally provided. The loan is issued for 20 years with a grace period of six years and JPY LIBOR+0.5%, which is less than 1% per annum, according to Ukrainian Prime Minister Arseniy Yatsenyuk. Japan provided the first development policy loan of USD 100 mln in August 2014, Interfax reported.

Alexander Paraschiy: The macro-financial loan from Japan is positive. However, unlike the IMF support, technical assistance loans have a very modest impact on capital accounts. As usual, the funding arrives by piecemeal and use of the funds is stretched over time. This support should prove helpful for institutional reforms (if the political will is present) but should not be relied upon for supporting balance of payments and propping up the hryvnia at the ForEx.