Japan promises Ukraine USD 1.9 bln in exchange for reforms

The Japanese government has promised USD 1.85 bln in support for the Ukrainian government if it makes progress with reforms, Prime Minister Shinzo Abe stated during a joint press conference with Ukrainian President Petro Poroshenko, the Ukrainian News agency reported on April 6. In regard to current aid, the government has granted EUR 3.5 mln for the construction of a warehouse at the Chornobyl nuclear power plant and USD 13.6 mln to rebuild the territories of the Donetsk and Luhansk regions ruined by war.

Alexander Paraschiy: Donors keep indicating that they are ready to support Ukraine but only in exchange for reforms. Among all of Ukraine’s developed partners, Japan seems to be the most sympathetic as it was the only donor that provided a loan (USD 334 mln in March) over the last half-year. The main impediment for external funding is the coalition’s collapse in mid-February after corruption accusations. As a consequence, expected 1Q16 funding (including at least USD 1.7 bln from the IMF) was delayed and it’s not clear when it will be unfrozen. Against this backdrop, we should be ready for gross international reserves falling to the USD 10 bln level (USD 12.7 bln currently) amid ongoing political uncertainty.