The European Bank for Reconstruction and Development (EBRD) is joining forces with the UK's development finance institution, British International Investment (BII), and the French development agency, Proparco, to support Ukraine's cross-border trade.

The two development institutions are providing the EBRD with risk-sharing guarantees for the bank's Trade Facilitation Programme (TFP), thereby sharing the risk on the EBRD's trade finance exposure in Ukraine: BII is providing up to US$37 million, while Proparco is providing US$20 million.

L/C benefits

Under the TFP, the EBRD guarantees payment under trade finance instruments issued or guaranteed by local issuing banks to international confirming banks.

Trade finance instruments include letters of credit (L/Cs), payment and other types of guarantees, bills of exchange and promissory notes, performance bonds and bid bonds.

DFIs' support for Ukraine

The arrangement builds on a plan drawn up last year by development finance institutions to collaborate on co-investments in Ukraine's private sector.

The co-investments will enhance the EBRD's capacity to underwrite import and export activities in Ukraine, ensuring that the country can continue trading with its international partners, and provide vital goods and services to its citizens.

Supply chain disruption

Since Russia launched its military action on Ukraine in 2022, trade flows and supply chains in Ukraine have been severely disrupted.

On top of the physical disruption to land and transport routes, access to financing for Ukrainian importers and exporters has been severely constrained, with international banks shying away from taking direct risk on Ukrainian trade finance transactions.

TFP support for Ukraine

The EBRD's TFP - a key part of the bank's efforts to restore global and regional food and energy supply chains - has supported more than EUR 1.4 billion (US$1.5 billion) in trade transactions for the most crucial goods for the Ukrainian economy since Russia's military action began.

Trade is one of the EBRD's five investment priorities in Ukraine, along with energy and food security, support for vital infrastructure and the private sector.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.