World Bank lends Ukraine USD 0.5 bln for financial sector strengthening

Ukraine and the World Bank signed an agreement for USD 500 mln under the Second Programmatic Financial Sector Development Policy Loan, according to a World Bank release on Sept 16. The objective of the program is to support the authorities in: (1) strengthening the operational, financial and regulatory capacity of the Deposit Guarantee Fund for the resolution of insolvent banks; (2) improving the solvency of the banking system by implementing bank recapitalization/restructuring plans and timely enforcement action; and (3) strengthening the legal and institutional framework to improve the resilience and efficiency of the banking system.

This operation is part of the World Bank Group’s broader financial support package announced in February this year, which aims to provide Ukraine with up to USD 2 bln in 2015. The USD 750 mln First Multi-Sector Development Policy Loan was disbursed in May 2014. The second wire amounting to USD 500 mln was transferred in August 2015.

Alexander Paraschiy: World Bank support was envisaged at the IMF external gap financing plan for 2015. Continued support after the recent USD 500 mln wire in August once more confirms that the relations between Ukraine and IFI’s are on the safe side, especially after a debt restructuring deal was reached. In this context, we can safely anticipate all scheduled payments from international partners (up to USD 6.5 bln) to be arranged on time till the year end. When factoring in loans for purchasing natural gas, as well as swap operations, we project gross international reserves will approach USD 16.9 bln (4.2 month of imports) by the year end.