World Bank approves new $500mn Ukraine loan

© Nguyen Huy Kham
The Washington-based World Bank approved a new international loan of $500 million to aid Ukraine’s struggling economy, the organization said in a statement.

“The package of reforms supported by this operation will help address the deep-rooted structural problems that have contributed to Ukraine’s current economic crisis,” said Qimiao Fan, World Bank Country Director for Belarus, Moldova, and Ukraine.

“We are helping Ukraine to implement an urgent set of measures, which will be essential to stabilize the economy, provide quality services to all Ukrainians and return the country to a sustainable growth path.”

The loan is part of the World Bank’s financial package announced in February. It aims to provide Kiev with up to $2 billion in 2015.

READ MORE: Ukraine fails to secure debt write-off at US talks

According to Ukraine’s Foreign Ministry, this project is the second in a series of operations the World Bank has undertaken aimed at supporting economic recovery and growth in the country.

“The importance of this decision lies in the fact that it will provide the so-called parallel financing from the government of Japan in the amount of $300 million, as well as by the Norwegian government in the amount of $24 million,” the ministry said in a statement.

Earlier in August, the International Monetary Fund (IMF) approved a new $1.7 billion loan for Kiev, a tenth of the $17.5 billion financial assistance program adopted by the IMF’s executive board in March. Ukraine agreed to implement economic reforms in return for the bailout.

According to the National Bank of Ukraine’s July statement, Kiev’s debt will hit 95 percent of GDP by the end of this year.

READ MORE: IMF approves new $1.7bn loan tranche to Kiev, plays down debt and security concerns

In August, Ukraine’s government managed to avoid a technical default by making a $120 million payment on its Eurobonds. The next payment of $500 million is due in September

In a bid to ease the burden on the country’s battered economy, Kiev authorities have recently asked credit organizations to write off as much as 40 percent of its international debt. Ukraine’s Finance Ministry said negotiations on the deal are in progress, while The Financial Times reported on Monday that Ukraine’s creditors have suggested a 20 percent haircut to the country’s sovereign bonds. The paper reported that a deal could be secured as early as this week.