Kiev: The head of the European Bank for Reconstruction and Development (EBRD) said it plans to invest up to around $1 billion (Dh3.67 billion) in Ukraine this year, including in the gas sector, provided real reforms are implemented.
Kiev has met long-standing requests from the International Monetary Fund and other organisations to raise energy tariffs and prune the crowded banking sector, but has moved slowly on issues such as overhauling debt-laden Naftogaz and cleaning up the judiciary and law enforcement. The EBRD pumped a record $1.2 billion into Ukrainian projects in 2014, but has invested only $100 million so far this year, holding off until it is convinced of progress.
“Good laws in themselves are only really good if they’re enforced and implemented,” EBRD President Suma Chakrabarti said in an interview with foreign media in Kiev on Thursday. “We’re going to aim for [investment of] something getting towards $1 billion ... but it’s completely dependent on reform implementation, so it could be less.”
He flagged the energy, banking and judicial sectors as areas that required particular attention. The EBRD, together with other international financial institutions, is meeting the Ukrainian energy ministry next week to discuss lending for gas supplies.
“Next week’s discussions are crucial. After that we also have to work out the reforms that are linked to this,” Chakrabarti said. If Ukraine meets the required targets, the amount the EBRD will invest in the energy sector this year “will be a large part of the ($1 billion) number,” he said.
However, the government has yet to fulfil a promise to break up the company into separate businesses managing gas production, sales and supply.
It has closed more than 50 banks over the past 18 months, but 114 are still in operation and Chakrabarti said Ukraine “still has far too many banks which are in our view the personal piggy-banks of oligarchs,” adding it would be a “great thing” if there were no more than 50.
As part of an IMF-led $40 billion bailout, Ukraine is trying to get investors to write off some of its bonds, but talks have soured, prompting Kiev to threaten to halt debt payments. Such a moratorium would not affect the EBRD’s work, Chakrabarti said.
“What does affect us, is the need for a macroeconomic framework that is successful and the debt restructuring is part of that, because Ukraine is over-indebted quite clearly and it does need some relief,” he said.