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EBRD lends $62.5 million to Ukraine Railways

By Anton Usov

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The EBRD is extending its support for the reform of Ukraine’s state railways system with a $62.5 million loan to finance the purchase of freight wagons for a programme to renew rolling stock.

The EBRD investment is part of the Bank’s region-wide response to the global economic crisis that has is now fully impacting the countries where the EBRD invests. EBRD financing was crucial to the roll-out of this project as financing would not otherwise have been possible.

The State Administration for Railway Transport of Ukraine (UZ) will use the EBRD loan to finance acquisition of general purpose freight wagons, an important step in helping to improve the underlying transport infrastructure that supports Ukraine’s economy.

With this project, the European Bank has now committed almost $240 million to the Ukrainian railways sector through three separate transactions since 1999.

All EBRD projects with UZ over the past decade promoted a wide range of sector reforms including separation of infrastructure and operations, divestment of non-core activities, tariff policy review and elimination of cross subsidy of passenger services. It is expected that they will have a significant impact on the sector and help increase the role of the private sector and introduce competition in railway services.

According to Thomas Maier, EBRD’s Infrastructure Business Director: “The project is aimed at renovation of UZ’s ageing fleet, which has become a critical bottleneck of the country’s transport system”. Ukraine badly needs to improve the state of the freight rolling stock to ensure the sustainable growth of the national economy, he added.

In addition to the EBRD loan, the French government is providing funding of EUR 350,000 to provide UZ with assistance in the efficient operation and maintenance of the new rolling stock as well as recommendations for upgrading its wagon tracking system.

As part of its report to the global economic crisis, the EBRD is this year planning investments of EUR seven billion across all the countries in which it is active, a 20 per cent increase over the original investments originally envisaged for 2009.

The European Bank for Reconstruction and Development is the biggest financial investor in Ukraine. As of 1 January 2009, it had committed €4.1 billion through 170 projects.

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