Ukraine and Japan ratified Credit Agreement that is to allow attracting long-term loan from Japan in amount of USD 300 million on preferential terms – Natalie Jaresko

Ukraine and Japan ratified Credit Agreement that is to allow attracting long-term loan from Japan in amount of USD 300 million on preferential terms – Natalie Jaresko
March 04, 2016.

Kyiv, March 4, 2016. Ukraine and Japan ratified the Credit Agreement that will allow attracting the USD 300 million long-term loan from Japan on preferential terms, said Natalie Jaresko, Finance Minister, at a press briefing at Ukraine Crisis Media Center. “Debates continue in Ukraine for many months as to whether we have the reforms underway or not. At the same time financial support to Ukraine by third countries including Japan is a clear sign, a clear answer to the question: governments of other countries would not be supporting our country if the reforms were not happening,” the Minister reassured.

Natalie Jaresko said that conducting 10 structural reforms was a condition for provision of this loan, she focused on three of them in particular. Thus eliminating the possibilities for tax evasion as well as combatting “tax holes” which were the preconditions for the loan. It included introducing e-administering of VAT as well as reinforced control over the transfer pricing. Thus a mechanism to combat the offshore transfer of capital was created. Secondly, one of the conditions for provision of the loan was to create acting control mechanisms not only over implementation of revenue but also over the budget expenditure. For this purpose powers of the Accounting Chamber of Ukraine were widened. Third example quoted by the Minister is reforming the gas market. It annuls the monopoly of the state oil and gas company Naftogaz NJSC as well as separates its functions of gas transportation, storage and extraction. “We have conducted all the reforms. These reforms are real. It is probably not what people would like to hear or what the majority of our citizens understand as reforms. However these steps are crucial to have the Ukrainian economy restored. These are the steps that have not been made over the previous 23 years of Ukraine’s independence. Our government has conducted them over mere 15 months,” emphasized Jaresko.

According to the Finance Minister the conditions of the agreement are “incomparably better” than previous commercial debts, meaning the debts in the form of Euro bonds. “Payback period for the loan is 20 years, first six of them is a period of preferential conditions with no payment. We shall not be paying back the loan at all. Interest rate constitutes Libor +0,05%, it is less than 1%. At the same time the cost of the commercial loan that we were acquiring before 2014 constituted about eight percent, while the payback term for the loan constituted only five years,” said Jaresko.

USD 300 million received in the framework of the new Credit Agreement will be directed to the general fund of the state budget and will help finance the priority needs of the country including its reforms and capital expenditure. “Thus people will experience the effect from acquiring of this loan,” the Minister noted. The Credit Agreement will come into effect at the end of March. “After that in April we hope to get the credit money in a single tranche that would be directed to the general fund of the state budget,” said Jaresko. The Minister added that Ukraine’s cooperation history with Japan is fruitful. The overall amount of the financial assistance that Ukraine has received from Japan constitutes USD 1,8 billion, one billion is the resources that will be spent on reconstruction of the Bortnychi aeration station.

After Maidan alone Japan disbursed over USD one billion, said Shigeki Sumi, Extraordinary and Plenipotentiary Ambassador of Japan to Ukraine. He said the government of Japan sees progress in holding reforms. That’s why provision of money according to this Credit Agreement is very important to continue reforming the country. “Now it’s critically important time for the government and the people of Ukraine. A lot of reforms are in place or in progress since the Maidan revolution. […] Now the Japanese government and the people of Ukraine should do the work together to implement these reforms,” emphasized the Ambassador. He said Ukraine’s economy is not in such a bad condition as one may possibly think it is, there are improvements since the last year. “In fact since the Maidan times there have been three important Japanese businesses that came to Ukraine for investment. […] This demonstrates that the business people of Japan started showing confidence in the future of Ukrainian economy,” said Shigeki Sumi. He noted that apart from providing financial assistance the Japanese government is providing consultations to its Ukrainian colleagues. “We believe in the Ukrainian people and in Ukraine’s government,” summarized the Ambassador.

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