Exclusive-World Bank pushes for $350 million Ukraine loan approval within days -sources

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FILE PHOTO: A participant stands near a logo of World Bank at the International Monetary Fund - World Bank Annual Meeting 2018 in Nusa Dua

By David Lawder

WASHINGTON -The World Bank is pushing for “fast-track” approval of an additional $350 million loan for Ukraine within days, to provide emergency cash for its efforts to defend against Russia’s invasion, people familiar with the plans said.

The expansion of an existing loan would provide “budget support” to Ukraine, leaving no restrictions on how President Volodymyr Zelenskiy’s government can spend it, the sources told Reuters.

One of the sources said the loan may be ready for board consideration as early as the end of this week, while another said next week was also possible, with disbursement coming within days of approval.

They said the plan has strong support on the World Bank’s 25-member executive board, despite objections from Russia’s executive director. The United States and Western allies control an overwhelming majority of the development lender’s voting shares.

A U.S. Treasury spokesperson declined to comment on the loan plan.

The move to quickly wire cash to Ukraine has taken on greater urgency at the World Bank since Russia invaded the country last week. World Bank President David Malpass told Zelenskiy in Munich on Feb. 19 that the organization was preparing a $350 million disbursement by the end of March, followed by other financing projects.

A World Bank spokesman declined to provide details of the plan but said: “We are currently preparing a package of fast-disbursing financing for Ukraine, which we hope to present to our board for consideration in the coming days.”

The sources described the disbursement as a “topping up” that would effectively double a $350 million Development Policy Loan https://projects.worldbank.org/en/projects-operations/project-detail/P177931 granted to Ukraine on Dec. 17 to support reforms to foster more competition in the economy, land reforms and access to credit for small farmers.

The plan would bring World Bank lending to Ukraine in the past year alone to over $1.5 billion https://projects.worldbank.org/en/projects-operations/projects-list?lang=en&countrycode_exact=UA&os=0, including loans for COVID-19 response and vaccinations, power grid improvements and education. World Bank financing to Ukraine has totaled $2.3 billion since the start of the COVID-19 pandemic in early 2020 and nearly $14 billion since the country joined the institution in 1992.

The new financing would not add to Ukraine’s policy commitments, and by expanding an existing loan, the bank can move to board approval much faster than if it were to start a completely new loan process with new program objectives, the sources said. Some of the funds for the supplement may be contributed by bilateral donor countries.

With Russia’s invasion force in Ukraine growing in scale, one of the sources said the $350 million disbursement could be held back if Zelenskiy’s government is deposed before the transfer is ready.

“If on the day of the disbursement, there are concerns that the funds will be misused, they will not be disbursed,” one of the sources said. “Unless the bank is sure that the funds will fall to the Ukrainian government, they will not be disbursed, up until the very last moment.”

The plan marks a move into “extraordinary terrain” in terms of speed and lending circumstances for the bank, which is better known for its post-conflict reconstruction lending, said Scott Morris, a senior fellow at the Center for Global Development and a former U.S. Treasury official.

“It’s laudable that the bank would stretch itself in this way,” he said.

Malpass and International Monetary Fund Managing Director Kristalina Georgieva also have said they are coordinating on support for Ukraine. Georgieva said on Friday that Ukraine has asked for emergency IMF financing and the Fund was exploring all options to aid the war-torn country, including through some $2.2 billion in capacity under its existing IMF loan program.

(Reporting by David Lawder; Editing by Leslie Adler and Jonathan Oatis)

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