World Bank Approves $350 Million Loan to Support Reforms for Economic Recovery in Ukraine
The World Bank’s Board of Executive Directors today approved a $350 million First Economic Recovery Development Policy Loan (DPL) for Ukraine in support of reforms that are critical to economic recovery and to help mitigate the impact of the COVID-19 pandemic.
The key reforms supported by the DPL include: (i) strengthening land and credit markets by creating a transparent and efficient market for agricultural land and resolving non-performing loans in state owned banks; (ii) fostering de-monopolization and anti-corruption institutions including by restructuring the gas sector; and (iii) bolstering the social safety net for the vulnerable elderly population to cushion the impact of the COVID-19 pandemic.
“The COVID-19 pandemic is resulting in a sharp economic downturn that is hurting the incomes of ordinary Ukrainians and small businesses, and straining the government’s budget,” said Arup Banerji, incoming World Bank Country Director for Belarus, Moldova, and Ukraine. “This development policy loan provides $350 million to support budget expenditures at a difficult time. The World Bank welcomes the Government’s commitment to these reforms to prepare the economy for recovery, including the significant steps taken to end the moratorium on agricultural land sales, and to bolster benefits for the vulnerable elderly population.”
Restructuring the gas sector by creating an independent gas transmission system operator is already helping safeguard Ukraine’s gas transit revenues. Strengthening Ukraine’s anti-corruption institutions is intended to help establish a level playing field in the private sector and bolster investor confidence. Resolving non-performing loans in state-owned banks will help increase the efficiency and flow of credit to Ukrainian firms.
“Ukraine has taken a historic first step towards establishing a transparent and efficient market for agricultural land and unlocking investment in agriculture with the approval of the land turnover law supported by this development policy loan,” said Faruk Khan, World Bank Lead Economist for Belarus, Moldova, and Ukraine. “To ensure that the land market will be transparent and efficient, it will be important to approve and implement additional legislation to strengthen land management, streamline land transfer procedures, enhance access to finance for small farmers, and widen participation in the market.”
This DPL is the first of two planned operations, with the second DPL expected to support the additional important land reform legislation and further strengthen pension benefits for the elderly population.
The development policy loan is part of the World Bank’s stepped-up support to Ukraine to address the impacts of COVID-19 and complements the approval of additional financing of $135 million for the Serving People, Improving Health Project and $150 million for the Social Safety Nets Modernization Project. Additional support to directly cushion the most vulnerable population from the impact of the pandemic is also under preparation.
The World Bank is a major development partner of Ukraine. Since Ukraine joined the World Bank in 1992, the Bank’s commitments to the country have totaled about $14 billion for more than 80 projects and programs.