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EBRD signs first project in Turkmenistan; US$ 35 million credit line to Central Bank
Turkmenistan received its first investment financing by an international financial institution yesterday in the form of a US$ 35 million credit line from the European Bank for Reconstruction and Development (EBRD).
The EBRD, by an agreement signed yesterday, will extend a loan of US$ 35 million to the Central Bank of Turkmenistan to on-lend to local participating banks, which will then lend money to private or privatising, export-oriented, local businesses. The loan is guaranteed by the government of Turkmenistan.
Stijn Albregts, Director of the Country Team at the EBRD, said: "This credit line, the first EBRD loan to Turkmenistan, represents the Bank's effort to design a programme that will assist the transformation of the country to a market economy. By concentrating on strengthening a few selected participating banks, and by working with export-oriented private enterprises, the EBRD will help build a critical mass of private enterprises which will support the growth of a market economy."
He added: "This is the beginning of a longer-term strategy, in which the banking sector gains experience and strength through the assistance provided by the programme. The credit line is also a response to concrete demands from a growing private sector".
Because this is the first time that both banking and the private sectors will handle a foreign exchange credit line for term financing, the EBRD will assist and supervise the implementation of the credit line project closely. An extensive technical cooperation programme will accompany the credit facility for its first two years of operation. The programme will provide assistance to each participating bank to improve strategy, organisation, management, financial performance, credit procedures, environmental due diligence and portfolio management.
After a detailed analysis of the banking sector, three banks have been selected to be the first participants: two private banks, Senagat Bank and Gaz Bank, and the state-owned Vnesheconombank. Technical cooperation for project start-up is underway to assist these banks and to prepare them for participation in the credit line. In addition, a programme for providing business advisory services will be set up to support private sector project initiation.
The design of the project and the associated technical co-operation programme have been made possible by various trust fund contributions, in particular by the Japan-Europe Co-Operation Fund, the ICEX-EBRD Technical Co-Operation Fund (Spain), and the European Commission Co-Operation Agreement.
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