The European Bank for Reconstruction and Development (EBRD) has approved a €50mn loan to Ukreximbank, a state-owned bank in Ukraine, to support continued access to finance for corporates and municipalities affected by Russia's war on Ukraine, the development bank said in a press release on June 23.

The war has inflicted significant damage on Ukraine's economy, with extensive destruction of infrastructure and production capacity. Approximately 35% of the pre-war population has been displaced, either internally or abroad. The economy contracted by an estimated 30% in 2022 and is projected to grow by 1% in 2023.

The loan falls under the EBRD's Resilience and Livelihoods Framework, which aims to minimise the economic impact of the war. The agreement was signed at the EBRD's London headquarters.

“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 programmes 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 strengthen Ukreximbank's lending capacity, helping it to secure and diversify its funding sources. It will provide financial support to private businesses, including small- and medium-sized enterprises (SMEs), as well as mid and large corporates, and municipalities impacted by the war. This funding aims to protect their human and organisational capital.

The EBRD, which has committed to investing €3bn in Ukraine in 2022-23 and has already deployed €1.7bn in 2022, along with an additional €200mn mobilised through partner financial institutions, shares the risk of its operations in the country with shareholders and donors. The loan's risk will be partially covered by first loss risk cover funded by the EBRD Crisis Response Special Fund.

Ukreximbank, as a state-owned and systemically important bank in Ukraine, was authorised to support the economy by financing critical and affected sectors, such as agriculture, fuel and energy supply, critical infrastructure, transport and logistics, after the war began.

The EBRD's medium-term finance bridges the financing gap caused by challenging market conditions. The loan will contribute to operational, financial and environmental improvements for Ukreximbank's clients, primarily operating in essential sectors such as agribusiness/food security, energy, transport, and manufacturing.

Municipalities, particularly in the western part of Ukraine, where many companies have relocated from the eastern regions, are experiencing increased financing needs. These municipalities require expanded infrastructure to accommodate internally displaced people and support business activities. Additionally, they need liquidity to compensate for temporary revenue losses and cover additional war-related expenses.

In December of last year, the EBRD provided a €25mn loan to Lviv, the largest population centre in western Ukraine. This loan received credit support from the United States of America, covering half of the amount, and aimed to provide liquidity to adapt to the challenging circumstances.