The European Bank for Reconstruction and Development (EBRD) will lend €200 million to Ukrainian Railways (Ukrzaliznytsya or UZ) to upgrade the country’s railway links with the European Union to its west. This follows €150 of emergency liquidity finance to UZ last year to help Ukraine keep its trains running.
Since Russia’s invasion of Ukraine last February, uncertainty about sea routes that traditionally carry most of the country’s imports and exports – including exports of grain vital for global food security - has prompted improvements to rail, road and river links with other countries.
This sovereign loan – €100 million for emergency finance and €100 million for working capital support – will mitigate the impact of the war by facilitating the expansion of cross-border capacity and improving railway connectivity with the EU. It will allow UZ to continue to provide vital services to people and businesses as well as to rehabilitate key rail corridors on its border with the EU and buy rolling stock.
The EBRD shares risks on its Ukraine investments with donors and shareholders. This loan is to be supported by guarantees of up to 50 per cent, with €60 million coming from the United States of America and €40 million from The Netherlands. France and the European Union, through its European Fund for Sustainable Development, provided guarantees for the EBRD’s earlier finance for UZ.
In addition, the project is expected to be financed by an investment grant of up to €10 million from a bilateral or multilateral donors, to cover investment in communications equipment, energy-efficient lighting and step-free access at several major railway stations, fulfilling the project’s resilience and inclusivity objectives.
Despite the impact of the war, Ukrzaliznytsya has maintained cargo and passenger transportation operations if at reduced capacity. The EBRD has been working with UZ since before the war and has stood firmly by the rail company since Russia’s invasion.
Loans to UZ form part of the EBRD’s five-pronged approach to supporting Ukraine’s real economy, which focuses on vital infrastructure, energy and food security, trade finance and support for the private sector. The EBRD, Ukraine’s largest institutional investor, has pledged €3 billion of investments in Ukraine in 2022-23, and in 2022 deployed €1.7 billion and mobilised a further €200 million through partner financial institutions.
