Ukraine’s state budget has received about $390 million from Japan as part of World Bank projects aimed at social protection and agricultural recovery, the Ministry of Finance said in a statement on Wednesday evening.
According to the report, Japan’s financial assistance in January consists of a $89.8 million grant under the Emergency Project for Inclusive Support for Ukraine’s Agricultural Recovery (ARISE) and a $300 million loan under the Investing in Social Protection to Improve Coverage, Resilience, and Efficiency (INSPIRE) project.
“I am grateful to the World Bank and the Government of Japan for their strong financial support for Ukraine. The funds raised will be used to reimburse the expenditures of the state budget of Ukraine for priority needs, in particular in the field of recovery and social assistance,” Finance Minister Sergii Marchenko said in a release.
The Ministry of Finance reminded that the INSPIRE project is funded by a $1.2 billion loan from the World Bank from the Trust Fund for the Provision of Necessary Credit Support to Ukraine (ADVANCE Ukraine) with the support of the Government of Japan and aims to ensure social protection of vulnerable populations during and after the war, as well as to strengthen the adaptability of the social support system to effectively respond to current and future challenges.
The ARISE project aims to support agricultural producers’ access to finance through concessional lending and grants.
The National Bank of Ukraine (NBU) together with international partners, in particular the World Bank and the European Bank for Reconstruction and Development (EBRD), are preparing a new mechanism for settling military risks, which they plan to present no later than the first quarter of 2024.
As noted on the NBU Facebook page, during the meeting of the regulator’s management with participants of the insurance market, the head of the National Bank Andriy Pyshnyy emphasized the importance of the introduction of insurance of political-military risks, which should be fully operational next year.
It was also noted that one of the priorities of the National Bank in 2024 is the development of a competitive, adaptive and cost-effective insurance market.
“New requirements for insurance companies bring us closer to European standards of regulation and supervision. Therefore, the implementation of new norms is a priority, and integration into the European community is task No. 1. We will have to move as fast as possible, but you can count on comprehensive support and mature constructive dialog,” Pyshny said, speaking about the importance of such changes for domestic insurance.
It was noted that in 2024, in particular, will begin the application of risk-oriented prudential supervision and improvement of requirements for the solvency of insurers, as well as a new type of supervision of market behavior of insurers to control compliance with the rules and standards of financial services.
“The National Bank is strengthening its staff with specialists who will evaluate insurers’ business models using a risk-based approach. Special attention will be paid to the assessment of insurers’ assets – property and securities, the value of which should be market-based,” Deputy Head of the NBU Dmytro Oleinik said during the meeting.
Separately, emphasis was placed on the importance of the work of financial monitoring units of insurers as a safeguard to attract companies to money laundering schemes, in particular for the purpose of tax evasion, and to limit ties with Russia.
At the same time, it was noted that the work continues in the Parliament to finalize the text of the new law “On compulsory insurance of civil liability of owners of land vehicles,” which should be adopted under the IMF program by the end of May next year.
Now insurance companies will have to prepare for the renewed field inspections by the National Bank in order to eliminate possible violations of the law in advance, emphasized representatives of the regulator.
Andriy Pyshnyy, EBRD, European Bank for Reconstruction and Development, NATIONAL BANK OF UKRAINE, NBU, WORLD BANK
The World Bank has announced the allocation of $550 million to help more than 90,000 farmers in Ukraine access concessional loans and grants for agricultural production.
The “Emergency Project of Inclusive Support for the Restoration of Agriculture in Ukraine (ARISE)” will facilitate access to concessional financing for agricultural producers in 2023 and 2024. The project will help farmers mobilize about $1.5 billion in working capital,” the WB said in a statement on Tuesday night.
It is specified that the financing of the ARISE project consists of a $230 million loan from the World Bank from the Trust Fund for Providing Ukraine with Necessary Credit Support (ADVANCE Ukraine), supported by the Government of Japan. The financing also includes a $320 million grant from the Ukraine Recovery, Rehabilitation and Transformation Trust Fund (URTF).
“The innovative design of the project envisages attracting additional financing of up to $150 million, when such funds are available from the World Bank and donors,” the release says.
“The ARISE project will help thousands of Ukrainian farmers, many of them small, continue to produce in what will undoubtedly be a very challenging environment in the coming months,” the statement quoted Antonella Bassani, World Bank Vice President for Europe and Central Asia, as saying.
The WB recalled that the total cost of damage to the Ukrainian agricultural sector from Russia’s invasion is estimated at $40.2 billion, and it has likely increased since the last Rapid Assessment of Damage and Recovery Needs was published in February 2023. This figure does not take into account the demining of farmland, damage to irrigation systems, losses to agro-logistics, and losses to food processing companies, the bank added.
The ARISE project will be implemented by the Entrepreneurship Development Fund and the Ministry of Agrarian Policy and Food of Ukraine. This is the fifth World Bank project approved for Ukraine this year under an innovative and flexible framework model. It provides for the rapid mobilization of partner resources to finance urgent needs, and such financing can be expanded as needed when additional funds become available.
Next year, the World Bank and the Government of Ukraine will focus on critical reforms and investments in priority sectors, including energy, health and social protection, education, housing rehabilitation, and agriculture, the release said.
The World Bank will provide Ukraine with $232 million in compensation for minor repairs to private houses and apartments affected by the Russian invasion under the Housing and People’s Empowerment (HOPE) project.
“The HOPE project will help thousands of Ukrainian families receive funds to begin repairing their homes before winter sets in. The project will also support the Government of Ukraine in laying the groundwork for a sustainable, inclusive, and green recovery – a huge task that will take time and significant international support. The World Bank is supporting Ukraine on its path to rebuild housing and other urban infrastructure,” said Antonella Bassani, World Bank Vice President for Europe and Central Asia, as quoted in the press release.
The initial financing of the project is $232 million, of which $70 million is a loan from the International Bank for Reconstruction and Development secured by a guarantee from the Government of Japan, and $162.5 million is a grant from the multidonor Trust Fund for Supporting the Recovery and Reform of Ukraine.
The current funding will help to reimburse the costs of repairing partial damage and repairs to 98,000 individual homes and 8,000 families in 160 apartment buildings in five regions. The press release notes that the program beneficiaries will receive compensation for the repairs.
Later, additional funding of up to $800 million is expected from the World Bank and partners in the form of loan guarantees, grants and other contributions, the statement said.
“As of February 2023, the total cost of damage to Ukraine’s housing sector was estimated at more than $50 billion. This project aims to help repair approximately two-thirds of the country’s damaged residential buildings that are considered suitable for repair,” the press release said.
The project will be launched by the Ministry of Communities, Territories and Infrastructure of Ukraine (Ministry of Reconstruction).
It is noted that the HOPE project is the fourth World Bank framework project approved in Ukraine this year.
It is estimated that 1.4 million housing units have been damaged by the Russian invasion, which is 7% of the total housing stock of 3.5 million people. At the same time, 87% of the damaged housing is apartment buildings, mostly in urban areas.
Preparation of new framework projects “Lifting up Education And Results in Times of Need” (LEARN) and “Investing in Social Protection for Inclusion, Sustainability and Efficiency” (INSPIRE) was discussed by the Ministry of Finance of Ukraine and representatives of the World Bank on August 29.
According to the Ministry of Finance on its website on Wednesday, the estimated cost of these projects is $500 million and $1.2 billion, respectively.
It is specified that also in the center of attention was a new project “Strengthening the health care system and preservation of life” (Heal Ukraine), announced earlier this year in the amount of EUR 368 million.
The Ministry of Finance reminded that the projects “Improvement of Higher Education in Ukraine for Results” in the amount of $200 million and “Modernization of the System of Social Support of the Population of Ukraine” in the amount of $750 million are currently being implemented.
It is indicated that at the meeting Deputy Minister of Finance Roman Yermolichev noted the importance for Ukraine to implement measures aimed at the formation of human capital, in particular the development of health care, education and social protection.
“For us now one of the main challenges is to work out effective measures and incentives for our citizens to return to Ukraine and invest their capital in the development and restoration of the state. In addition, we also have to work out the necessary solutions to make school education qualitative and effective for children,” he said.
In his opinion, the new joint LEARN project will provide the urgent needs for the reconstruction of the education sector in Ukraine.
The deputy minister added that special attention was paid to the continuation of the New Ukrainian School reform.
NEC Ukrenergo, the Ministry of Energy and the Ministry of Finance have signed two agreements with the World Bank to provide the company with $240 million in grant aid to improve the reliability of the energy system, Ukrenergo Chairman of the Board Volodymyr Kudrytskyy said.
“Almost $240 million is another significant contribution from our international partners to ensure the sustainability of our connection to the European energy system and the restoration of high-voltage substations,” he wrote on his Facebook on Tuesday evening.
According to his message, the first agreement provides Ukrenergo with grant funds from the German government, which will be used for the purchase and installation of STATCOM – special devices that increase the stable operation of the power grid.
“Ukrenergo fulfills an important technical condition of ENTSO-E to strengthen our connection to the European grid. STATCOM devices will not only increase the stability of the Ukrainian energy system, but will also have a positive impact on the balance of the entire interconnected European continental grid,” Kudrytskyi explained.
Another document determines the transfer of assistance to the NEC for the purchase of special equipment, autotransformers and other high-voltage equipment damaged by Russian missile and drone strikes.
At the same time, the head of Ukrenergo thanked the Ukrainian government, WB Vice President for Europe and Central Asia Antonella Bassani and WB Regional Director for Eastern Europe Arup Banerjee “for the fruitful joint cooperation and strengthening of Ukraine’s energy security”.
