Ukraine: EBRD to invest up to $1bn in 2015 if reforms are made

The head of the European Bank for Reconstruction and Development (EBRD) has said it plans to invest up to $1bn (£642m) in Ukraine this year, including in the gas sector, provided real reforms are implemented.

Kiev has met long-standing requests from the International Monetary Fund (IMF) and other organisations to raise energy tariffs, as well as prune the banking sector, but has not moved quickly enough on issues such as overhauling debt-laden Naftogaz, the state-owned gas company, and cleaning up the judiciary and law enforcement.

The EBRD pumped a record $1.2bn into Ukrainian projects in 2014, but has held off investing this year until more reforms are seen.

"Good laws in themselves are really good only if they are enforced and implemented. So passing them is one thing, that's a good thing to do of course. But then we need to see the implementation. So I think the population fundamentally wants to see, and so the business does, the corruption and vested interests are really being taken on, that they are really being tackled," EBRD president Suma Chakrabarti said in an interview on 2 July.

"So we won't give you an exact figure, because we don't know what it will be. But we are going to aim for something in the upper reaches of getting towards a billion dollars if we can. That would be our ambition. But it's ambition completely dependent on reform implementation. So it could be less as well," he added.

Chakrabarti flagged the energy, banking and judicial sectors as areas that required particular attention. The EBRD, together with other institutions, is meeting the Ukrainian energy ministry next week to discuss lending for gas supplies, with Chakrabarti labelling the talks as crucial.

If Ukraine meets the required targets, the amount the EBRD will invest in the energy sector this year "will be a large part of the $1bn number," he said.

However, the government has yet to fulfil a promise to break up the company into separate businesses managing gas production, sales and supply, plus more should also be done to clean up the banking system, Chakrabarti said.

"It is a good thing, and this is a compliment, that in the last year Ukraine has reduced the number of banks from over 170 down to about 114 or so. It still has far too many banks, and too many banks that are the personal piggy banks of oligarchs and not really serving as what banking systems should," said the EBRD president, adding it would be a "great thing" if there were no more than 50 banks in Ukraine.