Cooperation of Ukraine with World Bank and IFO is the way towards stability and development

“Ukraine highly appreciates open and sincere relations established between our country and the World Bank,” Minister of Economics of Ukraine Bohdan Danylyshyn stressed.

Over the time of Ukraine’s independence its cooperation with the World Bank facilitates to further economic growth and financial stabilization, stirring up market transformations, integration into the EU as well as provides an opportunity to take into account the world experience in introduction of measures for advancement of economic development.

Over this period the Bank proposed to Ukraine resources to the tune of over USD 5.56 bn which consists around 36.4% from the general sum of IFO financial resources over this timeline.

“On conditions of broadening of the global financial crunch Ukraine is interested in obtaining the significant financial resources from international financial organizations to soften negative fallout of the crisis on economic and social development of our country,” the head of economic department stressed.  

Bohdan Danylyshyn views under this situation the resources of the World Bank still remain the most competitive at the value of resources for Ukraine as compared to international capital markets.

On November 5, 2008 the Council of Directors of International Monetary Fund approved an annual Stand-by (SBA) program to the amount of around USD 16.4 bn targeting assistance to Ukraine to support its financial and economic stability.

The Economics Minister is convinced that introducing of the blueprint would facilitate to macroeconomic stability, lowering of inflation level, stabilization of the national system under conditions of the global crunch, trust on financial markets and structure reconstruction in the economy on conditions of worsening of foreign economic conjuncture.

The instrument will be directed to:

- solving of problems in financial sector by means of: 1) support of liquidity and broadening of guarantees in deposits; 2) strengthening of capacity of the banking system including the state funds; 3) regulating of an issue of debts of households and entrepreneurs’ sector;

- lessening of influence of external shocks and reducing of level inflation by pursuing a respective macroeconomic line.

The Economics Minister also emphasized readiness of the World Bank to operatively response and solve issues of providing resource support to Ukraine to correspond with our topmost needs of the development. In this context Bohdan Danylyshyn is grateful for the possibility to receive the backing on the side of the World Bank through applying a mechanism of a new system loan – the Third loan for the development policy.

So, on November 25, 2008 negotiations between the delegation of Ukraine with representatives of the World Bank have been successful which resulted into initialing of the text of Agreement on loan between Ukraine and IBRD concerning the project “The Third loan for the development policy”. Moreover, the Protocol and Letter of the Government of Ukraine to the World Bank concerning the development policy which would enable for the World Bank on December 23 of the current year to forward for consideration by the Council of Directors of the Bank this credit, which in its turn would enable signing of an Agreement on loan and receiving till the end of the year these funds to the tune of USD 500 mn for support of the state budget of Ukraine as well as carrying out structure and institution reforms.

According to Bohdan Danylyshyn, deepening of cooperation with the World Bank appears pressing not only to overcome the global financial crisis but to solve issues to ensure eliminating of restrictions for the development.

“Ukraine is concerned in obtaining the financial support of the World Bank for realization of infrastructure projects, primarily in those directions where Ukraine bears highest needs while the experience of cooperation appears the most successful: these are introducing of projects in the areas of state municipal and transport infrastructure, energy sectors and energy saving,” the Minister emphasized.

The year of 2008 has become a turning point for optimization of the structure of the World Bank portfolio in Ukraine, its reorientation for the support of real economics sector and development of infrastructure, also improvement of the state of project portfolio occurred. So, on the outcomes of 2008 financial year (01.07.2007 – 30.06.2008) Ukraine has demonstrated the best over all the years of collaboration with IBRD showing of applying the funds along the investment projects which totaled 13%.

In 2008 the portfolio of IBRD projects on all stages of the project cycle (initiating, preparing and realizing) has reached almost USD 3.5 bn. So, 9 investment projects were in active phase of realization, the sum of IBRD loans amounts USD 817.517 mn, as well as 1 system project “The Second loan for the development policy”.

September-October of the current year the laws on ratification of agreements into three investment projects under the IBRD support were approved, which gives an opportunity to launch realization of 2 infrastructure and 1 institutional projects to the general sum of USD 390 mn (agreements into the projects are being taken into effect):

- Project on modernization of state finances;

- Project on municipal infrastructure;

- Project on power energy transfer.

Furthermore, initiating and preparing of 4 investment projects of infrastructure development which would enable attracting additional resources in the sphere of energy and transport to the general sum of around USD 1.4 bn is being conducted.

So, Ukraine counts on holding negotiations with the Bank and approval by the Council of Directors of the World Bank by June 30, 2009 of the following projects:

1)      Improvement of motor roads and safety of roads;

2)      Rehabilitation of hydroelectric power stations;

3)      Rehabilitation and development of the system of electric supply of Kyiv;

4)      Raising of carrying capacity of Znamyanka-Dzhankoy railway line.

Bohdan Danylyshyn considers that joint acquisitions with the World Bank can be noticeably significant and that Ukraine is interested in obtaining financial support of the World Bank for realization of infrastructure projects in maximal amounts according to the Cooperation Strategy of the World Bank with Ukraine for 2008-2011.

 “We possess every reason to rely on deepening of cooperation with the World Bank and other financial organizations,” the Economics Minister of Ukraine is convinced.

With this objective an optimal mechanism for fast and effective applying of IFO resources to finance priority objects of social and economic development has been elaborated.

So, on October 17, 2008 the Government of Ukraine approved a new ordinance of the Cabinet of Ministers of Ukraine “On order of initiating, preparing and realizing of projects of economic and social development of Ukraine supported by international financial organizations”. This instrument envisages a series of changes introduction of which will enable to significantly stir up the process of initiating, preparing and putting in force agreements on loan as well as will ensure timely applying of funds on the stage of realization of joint with the international financial organizations projects. In particular, it will enable to synchronize the cycle of initiating and preparing of project with the budget cycle which will afford to manage in 12-days of preparation in average which exists in practice.

“Putting in force of this ordinance respond to urgent needs of international financial organizations and Ukraine to ensure effective attracting and use of investment resources for the development and will give impetus to the development of fruitful cooperation between Ukraine and the World Bank,” Bohdan Danylyshyn believes.

In the context of the development and deepening of bilateral cooperation Ukraine proposes to consider the possibility to provide financial support form the side of the bank in the following priority directions:

- Energy and energy saving: Project of rehabilitation of thermoelectric power station and Project in electric energy transition 2 phase.

- Development of transport infrastructure: improvement of transport exploitation state of motor roads along the directions Kyiv-Chernihiv-Novi Yarylovychy; Kipti-Glukhiv-Bachivsk; Kyiv-Kharkiv-Dovzhansky; Kyiv-Luhansk-Izvaryne; Kyiv-Chop; Kyiv-Kovel-Yagodyn; Kharkiv-Shcherbakivka; building and overhaul of roads in the directions: Kharkiv-Krasnograd-Pereshchepyne-Novomoskovsk; Dniporpetrovsk-Tzarychanka-Kobelyaky-Reshetylivka; building and improvement of transport exploitation state of motor roads connecting check-points via teh state border with cities of Ukraine which are planned to host the finals of Euro-2012 Football Championship.

- Municipal development: ensuring of improvement of functioning and development of infrastructure of Northern Crimean canal as a strategic priority in the sphere of water supply of Autonomous Crimean Republic; Project of the development of municipal infrastructure (2 phase) of improvement of heat supply of the cities.