First Development Policy Loan for Ukraine

The World Bank approved the First Development Policy Loan for Ukraine in the amount of US$ 251.26 million. The Board also discussed a Progress Report on the implementation of Ukraine’s Country Assistance Strategy. The meeting follows approval in recent weeks of two further loans in education (US$ 86 million) and energy (US$ 106 million), and release of the second tranche of the Second Programmatic Adjustment (PAL-2) loan (US$ 172 million).

„The Ukrainian government has set out an ambitious agenda designed to transform the economic and social development of the country, and to enhance Ukraine’s role in the global economy,“ says Paul Bermingham, World Bank Director for Ukraine, Belarus and Moldova. „We in the World Bank have adapted our programs to assist the government to achieve these goals. We now see a real opportunity to pursue the fundamental reforms needed to secure for Ukraine sustained strong growth and poverty reduction. Working with our development partners, we are responding quickly with a larger package of loans and advice designed to take advantage of this opportunity.“

Development policy (previously known as „adjustment“) lending will continue to be at the center of the program, with its focus on key policy and institutional reforms. The Development Policy Loan (DPL-1) is the first in a planned series of three annual loans designed to help the government translate its objectives into a sequenced and prioritized program of actions. It is a successor to the PAL program, for which the Bank released the second and final tranche of US$172.5 million on June 21, 2005. The DPL program seeks to integrate government and donor activities under three broad themes to improve public governance: investment climate, public administration and public finance management, and social inclusion.

„The first Development Policy Loan approved today supports priority reforms in key social and economic elements of the government’s ‚Meeting the People‘ program,“ says Mark Davis, Program Team Leader. „It focuses on the medium-term institutional and policy changes needed to sustain growth and deepen integration in the global economy, and is consistent with and supportive of the EU-Ukraine Action Plan.“

The Progress Report documents progress in implementing the Bank’s Country Assistance Strategy for the period 2004-2007, and sets out how the strategy will be adapted to meet evolving needs and opportunities during the next two years. While the overall goals remain broadly unchanged, implementation is planned to accelerate to take advantage of the opportunity created by the ambitious reform program of the new administration.

The lending program for Ukraine will have two main dimensions. The first is a new series of annual, fast-disbursing development policy loans (the successor to the PAL program) designed to support a comprehensive set of policy and institutional reforms. The areas of reform include macroeconomic management, investment climate, public administration, public finance management, rural development, and social services. The second dimension is a series of specific investment projects. These will include areas such as energy, transport, financial sector development, environmental protection, social protection, health, and education. The program will also include an extensive analytic and advisory services component.

„Over the next two years, the Bank has an available lending envelope of up to US$2 billion,“ notes Dusan Vujovic, World Bank Country Manager for Ukraine. „As we implement our program, we intend to work with the government to put in place a framework to measure the results of what we do, and to coordinate our efforts with those of other donors and international organizations.“

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