World Bank approves USD 0.5 bln in guarantees for Naftogaz
19 October 2016
The World Bank’s board of directors has approved USD 500 mln in loan guarantees for state natural gas producer and distributor Naftogaz of Ukraine, Ukrainian Finance Minister Oleksandr Danylyuk reported on Oct. 18 on his Facebook page. “This decision will allow for the heating season to pass smoothly,” he said.
The guarantees will open the possibility for Naftogaz to borrow money abroad (at low interest rates) for the purchase of gas. It was also reported that the guarantees might be accompanied by trade financing of up to USD 200 mln from the International Finance Corporation for gas purchases from a large European supplier, ENGIE.
Alexander Paraschiy: This news is very positive for the hryvnia’s prospects. We expect Ukraine to purchase nearly 5 bcm of natural gas at a total value of about USD 1 bln in October-December. Such volumes of energy imports through the autumn months were expected to create depreciation pressure on the national currency. But with World Bank loan guarantees in hand, this risk becomes quite modest. The C/A deficit expansion that we anticipate through the upcoming months still leaves enough room for hryvnia weakening till the year end. However, with a large part of the anticipated foreign currency deficit to be covered by loans, we see increasing chances for the hryvnia to not weaken above the UAH 26.5/USD mark till the year end.
