EBRD and MIGA join forces in covering trade finance risk in Ukraine and other EBRD countries

EBRD and MIGA join forces in covering trade finance risk in Ukraine and other EBRD countries

EBRD signs first agreement of its kind with Multilateral Investment Guarantee Agency (MIGA). Guarantee will cover EBRD trade finance in selected state-owned banks, firstly in Ukraine

The European Bank for Reconstruction and Development (EBRD) and the Multilateral Investment Guarantee Agency (MIGA) have signed a landmark first co-financing agreement, under which MIGA will issue up to US$ 200 million in trade finance guarantees to the EBRD to take part of the EBRD’s risk under its Trade Facilitation Programme (TFP). The first country to benefit from this agreement will be Ukraine.

The EBRD, a focus of international support for Ukraine, deployed €1.7 billion there in 2022, has pledged to invest €3 billion in Ukraine in 2022-23 and has marshalled further international partnerships and finance with shareholders and donors

The MIGA guarantee was signed during a visit to EBRD President Odile Renaud-Basso by MIGA’s Executive Vice-President Hiroshi Matano.

“This agreement launches a new era of cooperation between MIGA and EBRD,” said Executive Vice-President Hiroshi Matano. “The MIGA-EBRD partnership will facilitate needed trade finance in Ukraine and other MIGA and EBRD-supported countries at a time of rising economic pressure and heightened geopolitical risk affecting trade, supply chains, and critical imports.”

“This guarantee will have an important impact, helping us to increase our trade finance business in Ukraine, which is one of our strategic priorities for work in the country,” said President Renaud-Basso.

Since the war on Ukraine started in February 2022, trade flows and supply chains in Ukraine have been severely disrupted. This includes the agriculture sector, which accounts for 11 per cent of the country’s GDP, nearly 20 per cent of its labour force, and nearly 40 per cent of total exports.

On top of the physical disruption to land and transport routes, the effect on financial intermediation is significant; foreign commercial banks have stopped taking any direct risk on Ukrainian trade finance transactions. To tackle this, the EBRD’s TFP has significantly increased its headroom for Ukrainian banks and stepped in to cover part of the higher demand.

Since February 2022 the TFP has supported over €400 million in trade transactions for crucial goods for the Ukrainian economy. The TFP also supports the whole supply chain to address food security concerns – it facilitates the import of seeds, fertilisers, fuel, tractors and harvesters into Ukraine as well as the export of grain, oil seeds and vegetable oils to other EBRD countries of operation, including Egypt, Morocco, Turkey and Tunisia.

The EBRD developed its Trade Facilitation Programme to promote and facilitate international trade to, from and within central and Eastern Europe, the Commonwealth of Independent States (CIS) and the Southern and Eastern Mediterranean (SEMED) region. Under the TFP, guarantees are provided to international commercial banks to cover the political and commercial payment risk of transactions undertaken by issuing banks in the EBRD’s countries of operations.

More than 100 issuing banks in 26 countries participate in the TFP, working with over 800 confirming banks and their subsidiaries throughout the world.

Since the start of the programme in 1999, the TFP has supported more than 30,000 trade finance transactions with a total amount of more than €30 billion, including 3,000 foreign trade transactions of Ukraine for a total of more €4 billion.

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