The European Bank for Reconstruction and Development (EBRD) is making a €50 million loan to Ukrainian state-owned bank Ukreximbank, to support it in providing continued access to finance for corporates and municipalities affected by russia’s war on Ukraine.

The war has hit hard at Ukraine’s economy, with heavy devastation of infrastructure and production capacity, and around 35 percent of the pre-war population was either abroad or internally displaced. The economy is expected to have shrunk by 30 percent in 2022 and is forecast to grow by 1 percent in 2023.

This loan, which falls within the EBRD’s Resilience and Livelihoods Framework aiming to minimize economic damage from the war, was signed at the EBRD’s London headquarters today.

“Keeping finance flowing through trusted partner financial institutions such as Ukreximbank, despite the war - so the private sector and municipalities can continue to operate and provide services and support the economy - is central to the EBRD’s mission in the country,” said Matteo Patrone, the EBRD’s Managing Director for Eastern Europe and the Caucasus.

 “Ukreximbank has a decades-long successful track record of linking the EBRD with Ukrainian borrowers through tailor-made programs that support sustainable development. In wartime as well as during the post-war recovery it is fundamental for Ukreximbank clients in priority sectors to have access to investments, commercial funds, and war-risk coverage. New financing from the EBRD will definitely strengthen the resilience and adaptability of Ukraine’s economy,” said Oleksandr Shchur, Member of the Management Board of Ukreximbank.

The loan will both reinforce Ukreximbank’s lending capacity, helping it to secure and diversify its funding base, and provide financing support to private businesses (including small- and medium-sized enterprises, mid and large corporates) and to municipalities affected by the war, thus contributing to safeguarding their human and organizational capital.

The EBRD, which has committed to investing €3 billion in Ukraine in 2022-23 and which deployed €1.7 billion in 2022, plus a further €200 million mobilized through partner financial institutions, share risk on its operations in the country with shareholders and donors. Half the risk of the loan will be covered by the first loss risk cover funded by the EBRD Crisis Response Special Fund.

Ukreximbank is a state-owned, systemically important bank in Ukraine, fully owned by the government of Ukraine. After the war began, state-owned banks were authorized to support the Ukrainian economy by financing critical and affected sectors including agriculture, fuel and energy supply, critical infrastructure, transport, and logistics.

By offering medium-term finance, the EBRD effectively bridges a financing gap caused by adverse market conditions.

The sub-projects financed by the loan will bring operational, financial, and environmental performance improvements, supporting Ukreximbank clients operating predominantly in essential agribusiness/food security, energy, transport, and manufacturing sectors.

The financing needs of municipalities are also increasing, especially in the western part of Ukraine, considered relatively safe, to which many companies moved their businesses from the eastern regions. Municipalities need to expand infrastructure for internally displaced people as well as business activities, as well as need liquidity to compensate for temporary revenue losses and additional war-related expenses.

Last December, the EBRD lent €25 million to Lviv, the biggest population center in western Ukraine, with credit support from the United States of America covering half the loan, to provide liquidity to adapt.