The Board of Governors of the European Bank for Reconstruction and Development (EBRD) has recognized that additional shareholder support will be needed for the bank's work on Ukraine, which has intensified since the Russian invasion in February 2022, and estimates it at EUR 3-5 billion.
"A proposal from the Board of Directors on the scope of EBRD support for Ukraine, and on a potential paid-in capital increase, will be submitted to governors for a final decision by the end of 2023," the bank said in a statement on Thursday following its annual meeting, taking place this year in Samarkand (Uzbekistan).
The EBRD's shareholders are 71 countries, as well as the EU and the European Investment Bank. The share of the United States is 10.1%, France, Germany, Italy, Japan and the UK - 8.6% each, Russia - 4%, Canada and Spain - 3.4% each, the EU and the EIB - 3% each, the Netherlands - 2 .5%, Austria, Belgium, Sweden and Switzerland - 2.3% each, while the rest - from 1.3% and below. In particular, the share of Ukraine is 0.8%.
The EBRD recalled that deployed EUR 1.7 billion in Ukraine and mobilized a further EUR 200 million from partner banks in 2022. The Bank has committed to deploy EUR 3 billion there in 2022-23 and has so far mobilised EUR 1.5 billion from international donors to cover part of the risk.
The Board of Governors of the European Bank for Reconstruction and Development (EBRD) has affirmed that the Bank, working in collaboration with others, must play a critical part in international efforts to support Ukraine's real economy, both in wartime and in reconstruction. The EBRD's primary focus in Ukraine in wartime is on maintaining energy and food security, restoring critical infrastructure at national and municipal level, providing trade finance and supporting the private sector.
The Board of Governors agreed that paid-in capital is the most efficient, effective and fairly shared instrument to provide such support.
"A EUR 3-5 billion paid-in capital increase would enable investment of the nature and scale outlined without the need for systematic donor risk-sharing in 2024 and beyond," the EBRD said in the report.
According to EBRD President Odile Renaud-Basso, this decision reflects the commitment of our shareholders to support Ukraine and the trust our shareholders have in the EBRD to deliver that support's role in Ukraine, in both wartime and subsequent post-war reconstruction.
If approved, the capital increase will mark the third time the bank's shareholders have agreed to boost its capital base.
The EBRD was founded in 1991 with capital of 10 billion ecu. This doubled in 1996 to 20 billion ecu, then increased further in the wake of the global financial crisis to EUR 30 billion in 2010.
Minister of Finance of Ukraine Serhiy Marchenko welcomed this EBRD decision, but called for the exclusion of the Russian Federation from the shareholders of the EBRD and other international organizations.
The EBRD said that the Governors' decision on support for Ukraine was one of three key resolutions to be approved at the meeting in Samarkand. The second was to give the formal go-ahead for a limited expansion of EBRD activities to countries in sub-Saharan Africa, while including Iraq as part of the bank's "southern and eastern Mediterranean region" for the first time. The third was to modernize the framework for managing the bank's capital.
This third resolution is part of the bank's response to a report on the Capital Adequacy Frameworks of multilateral development banks. Over time, implementation of this and other applicable CAF recommendations will enhance flexibility in capital management, widen the sources of mobilization and increase EBRD impact across the full range of its activities, although in the short term the change does not create additional capacity, the EBRD said in the report.
The EBRD said that donors have extended support for Ukraine so far are the United States, Norway, France, the Netherlands, Spain, the European Union, Canada, the United Kingdom, Italy, Japan, South Korea, Switzerland, Taipei China, Germany, Austria, Denmark, Finland, Ireland and Sweden, Interfax-Ukraine reports.
