Ukraine’s Central Bank Axes Ban On ECA: Attracts Foreign Investment And Financing
As per the reports, Ukraine’s central bank has lifted restrictions on domestic firms’ repayments. The loans were backed by the foreign export credit agencies (ECAs), expecting that this step will help them attract the foreign investment and financing needed for imports.
Last year, the national bank of Ukraine decided to ban the cross-border currency transfer and purchases of foreign currency, immediately after Russia invaded the country.
But as per the announcement of the central bank last week, from June 16, Ukrainian borrowers are again granted permission to make repayments on overseas loans which are secured by a guarantee of an International financial institution or the participation of a foreign ECA or another government-owned agency.
The central bank says, “We estimate that as a result of this easing, new credit inflows to Ukraine will significantly exceed the outflows due to the repayment and servicing of existing loans.”
“Allowing fund transfers abroad to repay some categories of external loans will improve conditions for attracting funds to Ukraine. In addition, these changes will help expand the ability of international partners to channel funds towards the recovery of the Ukrainian economy.”, says the central bank.
The banks have already eased various other aspects of the general foreign payments ban, including those of imports. It has also allowed repayments on loans for essential goods which are required by the armed forces of the country. The bank states that It felt capable of loosening the restrictions considering the stable situation on the FX market, the sufficiently high levels of international reserves, and the increased maturity of funds in the banking system.
The Berne Union welcomed the decision representing the global credit insurance company, including the ECAs. “We’re happy to see that the National Bank of Ukraine has recognised the importance of maintaining access to ECA-backed finance by enabling currency transfer for servicing this kind of external debt” says Paul Heaney the association’s secretary-general. “This is certainly a positive outcome in terms of enabling the industry to continue supporting businesses that are actively invested in or trading with Ukraine.”
The members of the Berne Union have actively been discussing the different ways in which the industry will be supporting Ukraine. There is no doubt about the significant role that export credit will play in supporting economic reconstruction.
Some ECAs including the Export-Import Bank of the US, Export Development Canada, UK Export Finance, and Polandls Kuke had already restored the coverage for transactions involving Ukrainian borrowers.
Kuke welcomed the decision of the Ukrainian authorities and says its turnover on cover for trade with Ukraine has already exceeded the pre-2019 levels.
Piotr Maciaszek, the director of insurance and international relations says, “We tried to convince the Ukrainian side to take such a decision through various channels, suggesting it will open up the country for an influx of new investment projects”.
He adds, “We tried to convince the Ukrainian side to take such a decision through various channels, suggesting it will open up the country for an influx of new investment projects, Kuke was involved in long-term projects in Ukraine, guaranteeing payments to Polish banks and contractors. Now, after unlocking the possibility of repaying overdue liabilities, it will be feasible to talk about new projects so desperately needed to rebuild Ukraine’s infrastructure and modernise the whole economy. Polish business wants to participate in reconstruction and we at Kuke are ready to support it.”
Ukraine’s own ECA called on its overseas counterparts to restore the coverage of Ukrainian exporters as part of its allies’ support for the war-torn country, including through reinsurance of the domestic agency’s cover.