You're reading: Ukraine clinches $1.3 billion in loans to repay bank depositors, upgrade Kyiv’s sewage water plant

Parliament on Sept. 2 approved a $900 million loan from Japan to upgrade Kyiv’s Bortnychi aeration station, which treats the city’s sewage water.

Kyiv’s municipal
administration has since 2009 sought financing to upgrade the outdated station
whose three facilities were built in 1965, 1975 and 1985. Its design capacity
of 1.8 million cubic meters per day actually treats 1.3 million cubic meters of
sewage water, according to Ukrainian News.

The 40-year-loan has
a 10-year grace period with a very cheap annual interest rate of 0.1 percent.

Signed in June by Ukrainian President Petro Poroshenko and
Japanese Prime Minister Shinzo Abe, the loan agreement stipulates that at least
30 percent of the equipment and goods for the underlying project must be
Japanese-made, according to Kyiv-based Dragon Capital.

Apart from the latest loan, “Japan’s long-term financing to
Ukraine includes $300 million of budget support, expected to be disbursed in
the coming days together with a $500 million World Bank loan, and $200 million
of project financing for airport terminal construction, which started back in
2004,” Dragon Capital said in an emailed note.

Meanwhile, Germany’s KfW Develpoment Bank gave a €200 million
($225 million) loan to Ukraine’s Deposit Guarantee Fund, according to the
Finance Ministry. It’s for 15 years and comes with a five-year grace period and
a 2.6 percent yearly interest rate.

Dragon described
the loan as “sizable” given that the deposit fund must repay some $700 million
to failed banks’ depositors by the end of September.

The Deposit Guarantee Fund has
repaid an estimated Hr 43 billion since the start of 2014, with a total of 55
banks having been placed into receivership over the period and their total
guaranteed deposits amounting to Hr 64 billion (including disputed amounts),”
Dragon said. “The DGF’s own balances stood at Hr 17 billion in early August,
yet the bulk of these funds represented the fund’s maintenance margin, implying
additional funding needs.”

This week on Aug. 31 the director of
European Bank for Reconstruction and Development in Ukraine, Sevki Acuner, told
the Kyiv Post that the financial institution will provide Naftogaz Ukrainy with
a $300 million loan to purchase natural gas on the European market “within the
next several weeks.”

Kyiv Post editor Mark Rachkevych can be reached at
[email protected].