EBRD boosts investments in 2014 as global economic woes mount

By Anthony Williams

Strong demand for EBRD support expected to continue this year
The European Bank for Reconstruction and Development (EBRD) increased its investments in 2014, meeting rising demand from emerging economies grappling with protracted weakness and the impact of geopolitical tensions.
The rise in EBRD financing to €8.9 billion from €8.5 billion in 2013 came despite a sharp fall in its investments in Russia following guidance from shareholders in July that they would, for the time being, consider no new projects in the country.
As a result the Bank was able to invest more strongly in other countries that it serves. Demand is expected to remain high in 2015 with investments roughly in line with 2014 levels.

Financing for Russia accounted for just seven per cent of the total last year, with investments falling to slightly over €600 million from €1.8 billion in 2013.

Turkey, where the EBRD has been active for only five years, became the largest individual recipient of EBRD financing. Investments rose to €1.4 billion from €920 million in the previous year.  The Bank opened a third office in the country, in the south-eastern city of Gaziantep in response to demand for EBRD funding outside large metropolitan areas.
There was a strong increase in activity for Central Asia, particularly in Kazakhstan, where the Bank teamed up with the authorities to help re-energise the reform process.
Investments also rose in countries in the Balkans, the Caucasus and in eastern Europe, where the EBRD re-engaged energetically with Ukraine after the new administration embarked on a programme of economic reform. Kiev also signed up to an Anti-Corruption Initiative, a major step forward in its bid to improve the investment climate.
New lending – as well as renewed commitments – to Ukraine exceeded €1.2 billion, including support for road transport as the EBRD resumed lending to the public sector. The Bank has become involved in lending to upgrade Ukraine’s gas transmission system. A second Ukrainian office was opened in Lviv, aimed primarily at delivering services to the country’s smaller firms.
The Bank continued to build up its presence in the southern and eastern Mediterranean region, where its portfolio has now topped €1.5 billion across Morocco, Tunisia, Jordan and Egypt. 2014 investments in Egypt, by far the largest economy in the region, rose to €593 million, primarily in the private sector, from €151 million in 2013.
Separately, the EBRD responded to a request to apply its private sector expertise in helping Cyprus emerge from a severe crisis. Its first investment was the acquisition of a stake in the country’s largest bank, Bank of Cyprus. The EBRD opened an office in Cyprus in December.
The EBRD’s investments increased in 2014 as emerging economies continued to suffer due to events surrounding Russia and Ukraine, a stubborn lack of recovery in the eurozone and the global market turbulence that erupted towards the end of the year.
These developments will have weighed on the EBRD’s 2014 net earnings, reflecting particularly the impact of the severe economic downturn on the Bank’s operating assets in Ukraine and the effect of the steep fall in the rouble on its Russian equity holdings.
However, the vast majority of the EBRD’s loan book is performing well, producing stable interest flows and the Bank made another large realised profit in 2014. The EBRD has a very strong capital base and remains well placed to weather volatile markets.
In 2014, the EBRD stepped up efforts to prepare economies for more robust growth once the recovery is under way and to make them more resilient to future external shocks. This is part of a broader strategy that also involves forging greater economic integration and addressing global challenges, such as climate change and energy security.
In regard to economic resilience, the Bank concluded agreements with authorities on measures to improve the investment climate and governance standards in Albania,  Moldova and Serbia, in addition to launching the Anti-Corruption Initiative in Ukraine.
It also stepped up investment in sustainable energy projects, which now account for one-third of the Bank’s annual investment volume. In the run-up to crucial climate talks in Paris this year, demand for the EBRD’s expertise in sustainable energy financing is increasing, even from countries that are not EBRD members.
At the same time, the Bank is working with other multilateral development banks to help shape the post-2015 development agenda. It aims in particular to mobilise private finance that can help deliver the UN’s Strategic Development Goals.

Annual Bank Investment and number of operations
  ABI (reported rate) Number of operations
2013 2014 2013 2014
Central Asia KAZAKHSTAN 328 576 13 19
KYRGYZ REPUBLIC 134 35 17 19
MONGOLIA 64 117 12 15
TAJIKISTAN 14 62 13 11
Central Europe and Baltics CROATIA 288 298 19 21
ESTONIA 23 40 5 3
HUNGARY 200 6 10 2
LATVIA 23 4 5 2
LITHUANIA 32 32 6 3
POLAND 756 594 20 24
SLOVENIA 48 35 4 4
Cyprus CYPRUS   108   1
Eastern Europe and Caucasus ARMENIA 49 114 11 18
AZERBAIJAN 163 238 17 21
BELARUS 255 242 14 12
GEORGIA 116 214 14 14
MOLDOVA 128 105 15 8
UKRAINE 798 1,210 31 36
Russia RUSSIAN FEDERATION 1,816 608 56 19
South-Eastern Europe ALBANIA 138 119 11 5
BULGARIA 197 83 23 8
FYR MACEDONIA 74 252 10 10
KOSOVO 22 37 10 6
MONTENEGRO 78 75 7 10
ROMANIA 508 592 32 26
SERBIA 424 453 24 24
Southern and Eastern Mediterranean EGYPT 151 593 6 15
JORDAN 60 138 4 10
MOROCCO 168 225 9 7
TUNISIA 69 114 6 9
Turkey TURKEY 920 1,394 36 37
Total ABI       8,498 8,853    
Number net of regional operations double-counting           392 377