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Alexandre Draznieks, Head of the EBRD's Official Co-Financing Unit |
With developed and developing countries alike enmeshed in financial difficulties, poor countries stand to suffer most. Unable to afford stimulus packages to revive their financial sectors, these countries will be forced to cut back on crucial investments in infrastructure or support for small businesses that create jobs and lend to the poor.
Alexandre Draznieks, Head of the Official Co-Financing Unit, explains how the partnership with donors matters now more than ever to keep up the pace of market reforms in the EBRD region.
Has the financial crisis affected contributions by donors to the EBRD?
The value of technical cooperation (TC) agreements signed in 2008 is almost the same as in the previous year at around €80 million. From that perspective, the financial crisis doesn't seem to have had any significant negative impact on donor contributions so far. We can't exclude that that may happen in 2009. On the other hand, donors are well aware of the needs of the EBRD's countries of operations and how important it is to help these countries while the financial crisis is hitting them hard. I believe that donors remain committed to the EBRD region and will support the Bank's response to the financial crisis.
Some initiatives that were developed before the financial crisis unfolded have become even more relevant now. For example, the Neighbourhood Investment Facility (NIF), which was launched recently by the EBRD, the EIB, and the European Commission, has become an important instrument that provides donor assistance to EU neighbour countries such as Ukraine or Moldova. The Bank is developing an important facility with Sweden that will target investments in infrastructure at a time when such projects might suffer because of financial constraints.
A new donor joined the EBRD in 2008: Singapore. Its first contribution of €300,000 went to a project in Kazakhstan to improve public transport. New EU member states such as the Czech Republic, Hungary, Poland, the Slovak Republic and Slovenia remain important contributors to the EBRD's multi-donor Western Balkans Fund.
The Shareholder Special Fund (SSF), which was created in 2008 with €112.5 million from the Bank’s net income, is instrumental in delivering donor funding to projects which are otherwise difficult to bring to fruition.
The challenge in 2009 for donors and for the EBRD will be to keep up the good work and stand by developing countries that are suffering in the global downturn. A grant planning meeting took place yesterday and it saw donor representatives and the Bank's management discuss priorities for 2009 - 2010 in view of the financial crisis. There were engaging discussions to analyse priorities in infrastructure, environment and climate change related investments, small business and the financial sector.
Do you have an estimate of donor contributions needed in 2009 and what are the geographical and sectoral priorities?
More than €80 million in TC commitments were made last year. The Bank also received contributions of €20 million in the form of investment grants. More donor funds will be required this year given the financial crisis’s impact on the EBRD region. The funds will notably go to projects in the poorest countries in the region, i.e. the Early Transition Countries (ETCs), to build key infrastructure, to keep the private sector in business and to keep trade moving between countries. These countries are not affected directly by the financial crisis, but they are facing side effects on the real economy, such as much lower remittances flows.
Countries in the Western Balkans will also benefit from donor funding. In particular, much remains to be done in the area of infrastructure: roads, airports and electricity networks. These are expensive investments and the financial crisis will put these countries’ finances under strain. Our countries of operations need the support of donors now more than ever to continue building a foundation for future growth.
Donor funding for the Sustainable Energy Initiative (SEI) will remain a priority in 2009. Donors contributed about €200 million during the SEI’s first three years to support energy efficiency investments in 24 countries. The Bank needs donors to move ahead with the second phase of the Initiative that will help to turn countries of operations from energy intensive to energy efficient.
What about the Shareholder Special Fund? What has been its contribution to the Bank’s projects?
The key characteristic of the SSF is that it is additional to the funds provided by traditional donors. It complements and furthers donor contributions, such as those committed to the Western Balkans and ETC multi-donor funds.
The SSF also contributes to projects that donors are less willing to fund because they might not fit in their countries' overall development priorities. Another of the fund’s advantages is its flexibility. It can mobilise funds very quickly and it is untied, which means that it does not restrict the nationality of the consultants hired to implement a project to that of the donor who is providing funding.
It is important to stress that before turning to the SSF, the EBRD enquires first whether there is an interest from donors, in order to avoid crowding them out. The implementation of the fund has helped to deepen consultations with donors and has contributed to improving the dialogue between the EBRD and donors.
What examples can you cite of projects supported by the Shareholder Special Fund?
One flagship project prepared at the end of 2008 was a rapid response programme to help Ukraine’s financial sector cope with the banking crisis. The SSF approved €2.3 million of funding that the Ukrainian government and central bank will use to cover the cost of assessing the needs of financial institutions and to restructure them where needed. A bilateral donor later joined the project and this is a clear example of the fund and donors complementing each other. The SSF has also put aside €1 million for investments that promote gender equality.
The ETCs and the Western Balkans have benefited most from the fund with €45.5 million and €25 million respectively going towards these regions, while infrastructure, enterprises and sustainable energy were the sectors that received most help.
The SSF has currently used more than one third of the money available and intends to provide funding for more projects in the future. Its first working period ends in June 2009 and its future is under discussion between the Bank and its shareholders.
By Marjola Xhunga, Communications Adviser
Photos: EBRD
Contact: Official Co-financing Unit
13 February 2009
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