Ukraine to borrow EUR 200 mln from KfW

Ukraine will borrow EUR 200 mln from Kreditanstalt für Wiederaufbau (KfW) under 4.5% interest and 5-15 years maturity, according to a Cabinet decree issued on Aug. 12 that was made public on Sept. 2. This loan is the first part of a EUR 500 mln facility agreed with the German government on April 1. The German government will provide a state guarantee for this loan, according to the memorandum. The funds will be used for rebuilding the war-devastated eastern regions and budget financing.

Alexander Paraschiy: More external funding is the latest signal that Ukraine’s Western partners have confidence in reforms being implemented. What’s more, the funds will be another means of underpinning hryvnia stability. Unlike IMF money, such loans will go directly to the ForEx, thus securing extra foreign cash supply, which is very timely in the context of the current global equity instability. This loan doesn’t seem to have been included in the IMF plan for external gap financing (worth USD 18.3 bln for 2015), which means that the money probably comes on the top of that. Nevertheless, we are not rushing to improve our estimates of gross international reserves (forecasted at USD 15.7 bln by the end of 2015), since the sum is not large and the formalities for arranging such loans usually takes time.