Transcript Presentation UMDF - Development Funds

The Ukrainian Municipal Credit
Market Development
V.G. Кozyr
Executive Director of the Ukrainian
Municipal Development Fund
Brief information about Ukraine
• Ukraine is an Eastern European country
• The population of Ukraine is about 48
million people
• The area of Ukraine is 604 square
kilometers
• Kyiv is the capital of Ukraine
• There are 30,000 localities in Ukraine
• There are 1,340 towns in Ukraine
The main objective of the
Project:
Creation of sustainable local
borrowing system for the
investment requirements of the
local self-goverment bodies
(BLSG) financing and the
development of a Municipal
Credit Market in Ukraine
The main targets of the Project
• Improvement of the
intergovernmental fiscal
policy arrangements
• Improvement of the
regulatory and legal
framework for local
borrowing
• Providing technical assistance
to the BLSG during the
borrowing process
• Providing technical assistance
to the commercial banks - the
BLSG lenders
The Ukrainian
Municipal
Credit Market
Development
Principles of the Project arrangement
• Transparency and openness
• Creation of the conditions to the BLGS
development based on market principles
• Provision of technical assistance to the BLGS
to improve their financial position
• Improvement of the regulatory and legal
framework for local borrowing
• Encouragement for Ukrainian banks to enter a
new line of business - BLGS lending
The main objectives of the Ukrainian
Municipal Development Fund (UMDF):
• Providing the access to the long-term funds
• Improving of the BLSG’s solvency
• Improving municipalities’ use of strategic planning and their
budget and project management
• Increasing of the commercials banks safety and interest in
providing long-term loans for the BLSG and enterprises
providing municipal services to the population
• Preparing reforms to the regulatory and legal framework that
provide for the creation of a more favourable environment for
the BLSG financing of priority public projects
UMDF Organizational Chart
Supervisory Board
Executive Director
Regions
Coordinator
Financial
Management
Specialist
Assistant to ED
Banking
Specialist
Procurement
Specialist
Chief
Accountant
General arrangements of the
Project
Ministry
of Finance
of Ukraine
World
Bank
US$ 150 million Loan
UMDF
Lending
Application to
determine
eligibility
Selection
Technical
assistance
Recommendation
of eligibility
ФРМУ
ФРМУ
Commercial
banks
Lending
Cities
(towns)
Project ideology :
 Creation of a Municipal Credit Market as the financial
basis of the economic growth at the local level
 Quality improvement of the municipal financial
management and the implementation of the
responsible financial policy
 Economic growth stimulation at the local level
 Co-financing of the investment projects:
- local budget (20%)
- lending (80%)
Project ideology (continuation)
 Foreign exchange
risk
The Ministry of
Finance of Ukraine
 Credit risk
Commercial banks
Eligible selection criteria for municipalities:
• The availability of a technical project and feasibility study
for the project
• Adherence to the legislative limitation as to loan size and
total debt outstanding
• Project confirmity with priorities of the municipal
strategical development plan
• Budget parameters meet minimum standards for
consideration of additional debt
• Eligible projects for financing under the project framework
• Local authorities positively disposed to new approaches to
debt finance and project implementation
• Proper practice of the BLGS of qualitative financial
management
Eligible Capital Investment
• Water and Waste Water Collection
• Treatment and Distribution Systems
• District Heating
• Electricity
• Metering Systems
• Urban Transport
• Rehabilitation of Local Roads
• Recreative objects
• others
Directions of the technical
assistance provision for
municipalities
• Training programs for conducting a feasibility
study of the investment projects
• Implementation of the full functional system of
the fiscal management
• Transition to the strategic budget planning
• Development of the responsible debt policy
The main difficulties of the project
implementation
• No experience with previous loans to local
authorities for capital investment
• Imperfection and unpredictability of the
intergovernmental fiscal arrangements between
the state and local budgets
• Recent reduction of revenue for local budgets as a
consequence of income tax reform
• Augmentation of the salary expences in the local
budget structure and reduction of capital expences