World Bank approves USD 500 mln for Ukraine banking system support

The World Bank’s Board of Executive Directors reported that it approved on Aug. 7 a USD 500 mln loan to support a program of high-priority reform measures in Ukraine’s banking sector. In particular, reform measures supported by this loan – the first in a series of two – will strengthen the financial, operational, and regulatory capacity of the Deposit Guarantee Fund (DGF) to resolve the fate of insolvent banks. The loan will support state efforts to improve the solvency of the banking system through independent diagnostic assessments of the largest 35 banks in the country. The loan will also assist authorities in strengthening the supervisory framework to make the banking sector more efficient, transparent, and resilient. The loan is part of the World Bank Group’s broader crisis-response support package announced in March this year, which aims to provide Ukraine with up to US 3.5 billion by the year end.

Alexander Paraschiy: The loan is a very positive signal, in the context of the anticipated USD 1.4 bln wire from the IMF. The World Bank and the IMF work in close cooperation and the World Bank provides money only if the IMF is optimistic about cooperating with a particular country.  Secondly, it is very good news for Ukraine’s recently destabilized ForEx market. Unlike IMF money, which is designated for the gross reserves of government accounts for external debts repayments, World Bank funds are targeted for internal use, which means that they will underpin the ForEx market in the near future. The prospects of strengthening the Deposit Guarantee Fund and improving the solvency of the banking system are especially critical in this time of war.