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Full commitment on shareholder support to EBRDs role in Ukraine

Proposal on potential capital increase for decision by year-end

EBRD Governors reaffirm importance of Banks role supporting Ukraines real economy in wartime and in reconstruction

Proposal on potential paid-in capital increase will be prepared for decision by the end of 2023

EBRD is deploying EUR3billion in Ukraine in 2022–23; further needs are being considered

The Board of Governors of the European Bank for Reconstruction and Development (EBRD) has affirmed that the Bank, working in collaboration with others, must play a critical part in international efforts to support Ukraines real economy, both in wartime and in reconstruction.

At the EBRDs 2023Annual Meeting in Samarkand on Thursday, the governors also recognised that additional shareholder support will be needed for the Banks work on Ukraine, which has intensified since the Russian invasion in February 2022.

A proposal from the Board of Directors on the scope of EBRD support for Ukraine, and on a potential paid-in capital increase, will be submitted to governors for a final decision by the end of 2023.

The EBRD, Ukraines biggest institutional investor, deployed EUR1.7billion in Ukraine and mobilised a further 200million from partner banks in 2022. The Bank has committed to deploy EUR3billion there in 2022–23and has so far mobilised EUR1.5billion from international donors to cover part of the risk. The EBRDs primary focus in Ukraine in wartime is on maintaining energy and food security, restoring critical infrastructure at national and municipal level, providing trade finance and supporting the private sector.

The only institution to work at this scale, in a unique demonstration of support and solidarity for the Ukrainian people, the EBRD agreed to provide half its finance at its own risk. The other half of its finance has come with generous support from 19donors (*).

When circumstances allow for full reconstruction in Ukraine, the financial challenge will be daunting. The latest international needs assessment, based on wartime damage in 2022, suggests the cost of reconstruction could be as high as US$ 411billion.

Governors stated their full commitment to providing the shareholder support required to enable the Banks role in Ukraine and agreed that paid-in capital is the most efficient, effective and fairly shared instrument to provide such support, noting that a EUR3–5billion paid-in capital increase would enable investment of the nature and scale outlined without the need for systematic donor risk-sharing in 2024and beyond.

«We warmly welcome this decision. It reflects the commitment of our shareholders to support Ukraine and the trust our shareholders have in the EBRD to deliver that supports role in Ukraine, in both wartime and subsequent post-war reconstruction. Given the magnitude of the financial challenge in supporting Ukraine, a paid-in capital increase is the most efficient form of support that shareholders can provide and we are looking forward to working with shareholders to prepare a decision by year-end,» said EBRD President Odile Renaud-Basso.

If approved, the capital increase will mark the third time the Banks shareholders have agreed to boost its capital base. The EBRD was founded in 1991with capital of 10billion ecu. This doubled in 1996to 20billion ecu, then increased further in the wake of the global financial crisis to EUR30billion in 2010.

The Bank has a unique role to play in this crisis. After more than 30years of promoting economic transition in Ukraine, the EBRDs emergency response to the war focuses on the real economy. EBRD funding is also used to help refugees in neighbouring countries and to assist the municipalities hosting them.

Last year, EBRD support for Ukraine included the provision of EUR150million of emergency liquidity to Ukrainian Railways, a total of EUR520million to the electricity company Ukrenergo, and a EUR500million package for the gas company Naftogaz. By keeping the lights and heating on and the train running, this finance provided assistance to Ukraines businesses and helped maintain livelihoods.

The EBRD is currently expanding its support for municipal authorities around the country. With support from the USA, in December the Bank lent EUR25million to the city of Lviv, in western Ukraine, and, with support from the EU and the USA, is providing Khmelnytskyi, a city that became a home to thousands of displaced people, with EUR10.6million to improve its public transport system by renewing its trolleybus fleet.

The Bank is working with Ukrainian Railways and private investors on rehabilitating transport infrastructure in the west of the country, to improve connectivity with the European Union, and supporting private investment including by committing US$ 40million to Horizon Capital Growth Fund IV, a fund which has raised more than US$ 250million to make growth equity investments in Ukraine and Moldova.

The Governors decision on support for Ukraine was one of three key resolutions to be approved at the meeting in Samarkand. The second was to give the formal go-ahead for a limited expansion of EBRD activities to countries in sub-Saharan Africa, while including Iraq as part of the Banks «southern and eastern Mediterranean region» for the first time. The third was to modernise the framework for managing the Banks capital.

This third resolution is part of the Banks response to a report on the Capital Adequacy Frameworks of multilateral development banks. Over time, implementation of this and other applicable CAF recommendations will enhance flexibility in capital management, widen the sources of mobilisation and increase EBRD impact across the full range of its activities, although in the short term the change does not create additional capacity.

(*) Donors who have extended support for Ukraine so far are The United States, Norway, France, The Netherlands, Spain, the European Union, Canada, the United Kingdom, Italy, Japan, South Korea, Switzerland, Taipei China, Germany, Austria, Denmark, Finland, Ireland and Sweden.

18.05.2023


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