Ukraine to borrow USD 3 bln from China for agro
3 July 2012
Ukraine plans to borrow USD 3.0 bln from China to develop agriculture, according to Bloomberg. The 15-year loan will carry an interest rate of 6% and Ukraine will start repaying the principal after a five-year grace period. Ukraine’s Cabinet of Ministers requested yesterday that parliament increase the 2012 state budget deficit and public debt limit by the same USD 3.0 bln. The loan announcement comes shortly after the National Bank of Ukraine and People’s Bank of China signed a Hryvnya/Yuan swap agreement for an equivalent of USD 2.4 bln.
Vitaliy Vavryshchuk: Ukraine’s agriculture badly needs long-term funding at an acceptable cost and a sizable credit facility from China should benefit the sector. So far there is no clarity as to who will be eligible to receive the money and what the criteria for investment projects will be, but we doubt the government is capable of distributing money in an efficient and transparent way. The key positive implication of the news at the moment is that the new loan, if tapped in full this year already, will boost the central bank’s reserves by about 10%. This should lend support to stability in the local currency market.
