The European Bank for Reconstruction and Development (EBRD) is substantially increasing its trade finance offer for Ukraine to support both general trade and food security as the country grapples with keeping its economy working following its invasion by Russia.
These measures are part of €1 billion of activity that the EBRD intends to undertake this year in Ukraine, in cooperation with donors and other partners.
The latest increase raises to €330 million the envelope for Ukraine under the EBRD’s Trade Facilitation Programme, a rise of over 40 per cent since the war on Ukraine began on 24 February. Because this is a revolving facility, the facility will support at least €500 million of export and import transactions by Ukrainian companies via ten EBRD partner banks, on an annual basis.
Part of the increase is focused on food security, helping avert a global food crisis in the autumn and next year, with the EBRD deploying its strength across its agribusiness work. As well as the trade finance increase, a dedicated food security package is currently being finalised.
The war has disrupted Ukraine’s entire supply chain, closing import-export routes via the country’s southern coast and to the north and east by land, and making it difficult for businesses to function normally, for farmers to plan crop financing, and for food retailers to keep shop shelves stocked. Nevertheless, an estimated 60-70 per cent of Ukraine’s economy is functioning and quickly adjusting to operating in a war, and it is essential to maintain the flow of working capital financing through the banking system.
The EBRD is helping to provide such financing by adding its investment-grade guarantee to trade finance instruments issued by Ukrainian partner banks under the export-import contracts of their clients.
To address urgent needs resulting from the war, the EBRD is prioritising five areas within the Ukrainian economy: trade finance, energy security, vital infrastructure, food security (covering provision of liquidity to farmers via banks for the spring sowing campaign as well as to agribusiness companies and food retailers) and providing liquidity to pharmaceutical companies. Investments in all areas will involve risk-sharing with partners.
The EBRD was swift to condemn the Russian invasion of Ukraine on 24 February and pledged to stand by Ukraine. In early April, the EBRD’s Board of Governors voted to suspend open-endedly the access of Russia and Belarus to EBRD finance and expertise, and the Bank is closing its offices in Russia and Belarus.
As well as a resilience package for Ukraine and neighbouring countries affected by the war, the EBRD has pledged to help finance Ukraine’s reconstruction once conditions permit.