WASHINGTON, September 15, 2015 – The World Bank’s Board of Executive Directors today approved a US$500 million IBRD operation to finance the Second Programmatic Financial Sector Development Policy Loan in Ukraine. This new financing supports a number of high-priority reform measures in the banking sector in response to the financial crisis in Ukraine.
“Bringing back stability and economic growth to Ukraine will only be possible if the country stays on the path of reforms,” said Qimiao Fan, World Bank Country Director for Belarus, Moldova, and Ukraine. “Our new operation will help this goal by supporting a number of measures to stabilize the country’s financial sector and create a healthier banking sector. Timely implementation of banking sector reforms is needed to help revive credit to the real economy, which is key for financing the recovery.”
In particular, reform measures supported by this loan – the second in a series of two – will strengthen the capacity of the Deposit Guarantee Fund to ensure that it can adequately perform its critical bank resolution and insured deposit payout functions in the case of bank failures.
The loan will also help stabilize the banking sector through conducting diagnostics of the country’s largest banks and implementing recapitalization and restructuring plans for those banks that are found to be undercapitalized. Finally, this operation will support legal and institutional reforms necessary to improve the resilience and efficiency of the banking system in the medium to longer term, particularly, focusing on limiting related-party lending in the banking system.
“The Ukrainian authorities have taken some impressive steps to stabilize and reform the economy and we are now seeing tentative signs of stabilization”, said Mr. Fan. “However, because the challenges are so unprecedented, it is critical that the authorities continue to accelerate reforms.”
Speaking of the new operation, Valeria Gontareva, Governor of the National Bank of Ukraine, praised the cooperation with the World Bank. “In these challenging times, it is very important that we continue our fruitful cooperation aimed at implementing the next stage of the banking sector stabilization reforms,” she said.
This operation is part of the World Banks broader financial support package announced in February this year, which aims to provide Ukraine with up to US$2 billion in 2015. With the approval of this operation, the World Bank will have delivered US$1.215 billion to Ukraine in 2015, including US$1 billion direct budget support.
The World Bank is a major development partner of Ukraine. With this new budget support operation, the Bank’s current financial support to the country amounts to about US$4 billion. Development policy operations support critical reforms recently undertaken by the government, and the current Bank's portfolio of investment projects are improving basic public services that directly benefit people of the country, such as water, sanitation, heating, power, roads, social assistance programs and health services. Since Ukraine joined the World Bank in 1992, the Bank’s financial commitments to the country have totaled over US$9 billion on projects and programs.
About the World Bank Group
The World Bank Group (WBG) is one of the world’s largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank; the International Finance Corporation (IFC), the Bank’s private sector arm; the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world. For more information, please visit www.worldbank.org, www.miga.org, and www.ifc.org.