In a second attempt this year to secure another tranche under the extended financing facility program (EFF) the Ukrainian delegation headed by Vice Premier Vasyl Rohovy met with IMF management in Washington to prove that Ukraine is a transition economy state. The IMF has expressed readiness to provide the required backing to our government’s efforts and finally agreed to finalize the key aspects of the program during its upcoming return visit in October. In the meantime, Volodymyr Krotiuk, assistant of National Bank chairman Volodymyr Stelmakh who is on an overseas trip, shared the results of another interesting, albeit less lucrative, undertaking.
The Federal Government of Germany has agreed to provide 5 million euro for the German- Ukrainian Fund (GUF) organized jointly by the Finance Ministry and NBU as part of the Transform program. A press conference was held for this event with the participation of ministerial director Prof. Michael Bonet who is head of the delegation for the Federal Ministry for Economic Cooperation and Development of Germany.
Observers derived professional satisfaction from the new phase of GUF activation whose only employee cum executive director is Volodymyr Krotiuk himself working on a voluntary basis. The enthusiasm with which the Germans related the prospects and cost-effectiveness of micro- crediting of Ukraine’s farming sector, for which 5 million euro has been provided, conjured up memories of Bank Ukrayina whose crediting of the agrarian sector led to its liquidation.
Nevertheless, GUF, judging from everything, does not run similar risks with lines of credit to be extended directly to smalltime agricultural producers and traders via Ukraine’s leading banks, Aval and Pryvatbank, to name but a few. Simply put, under the crediting procedure GUF is to enter into agreements with participating banks which, in turn, are to sign agreements with individual loan recipients. Essentially, the German creditors are not involved with the latter, satisfying themselves with analyzing the banks’ standing and the level of experts’ training. Thus the only risk Germany faces in this process is bankruptcy of a participating bank which, considering the GUF makeup, is minimal. Therefore, as The Day has learned, Germany did not insist that Ukraine provide special guarantees of loan safety.
However, those versed in the system of target crediting in Ukraine posed questions of who will be held accountable to the Federal Government of Germany in the event of default on loans and whether anything of the kind has previously happened to GUF. Incidentally, the draft budget for 2003 includes a clause under which the state would assume full liability for debts of creditors defaulting on their obligations, which would be repaid from the state treasury. No satisfactory answers were provided for these questions. Director of NBU International Credit Lines Nataliya Yakubenko told The Day that “out of the 6,000 loans, 3,000 have been recovered.” With regard to the agreements signed with NBU (initial funding came in the form of grants), participating banks returned all money to NBU accounts in late 2000 which was immediately transferred to the accounts of GUF (which had started operating). Now loans are extended under new agreements. To date, agreements for some 8 million euro in loans have been reached. More loans are up for the taking. According to Ms. Yakubenko, in the event of default on loans, liabilities will not be covered from the state budget, but will be assumed by the Finance Ministry (distinguishing between the two is rather problematic — Auth.) or all of the GUF founders.
