Minister for Europe (): Today, I have laid a
Departmental Minute which describes a new liability the Foreign,
Commonwealth and Development Office (FCDO) are undertaking to
support the economic stability of Ukraine following Russia’s
invasion in February 2022.
It is normal practice, when a Government Department proposes to
undertake a contingent liability in excess of £300,000 for which
there is no specific statutory authority, for the Minister
concerned to present a Departmental Minute to Parliament giving
particulars of the liability created and explaining the
circumstances; and to refrain from incurring the liability until
14 parliamentary sitting days after the issue of the statement,
except in cases of special urgency.
This Departmental Minute sets out details of a new liability
undertaken by the FCDO. The liability is a further guarantee to
support $500m of additional lending by the World Bank to the
Government of Ukraine. This guarantee has an expected maximum
exposure of up to £676m (once interest payments are accounted
for). The guarantees will be denominated in USD. I have
separately notified the Chairs of the Public Accounts Committee,
Foreign Affairs Committee and International Development
Committee.
FCDO will guarantee both principal and interest repayments from
Ukraine to the World Bank. A UK pay-out would be triggered if the
Government of Ukraine miss a repayment by 180 days.
The exact length of the liabilities is linked to the terms of the
agreed financing between the World Bank, and the Government of
Ukraine. The World Bank’s lending is expected to have a maturity
of 29 years and a 7-year grace period during which only interest
payments are due.
The war has placed huge pressures on Ukraine’s economy, with a
large and unmet fiscal deficit emerging across 2023. The
international finance community, including development banks like
the World Bank, have stepped in and are playing a key role in
providing rapid and reliable financial support at a critical
time. This guarantee will help the Government pay for essential
services like salaries and social services and contribute toward
Ukraine’s economic stability.
Ukraine is currently undertaking an IMF Programme known as a
Programme Monitoring with Board
Involvement(opens in a new tab). We continue to engage with
the IMF and the Government of Ukraine to assess Ukraine’s
willingness and ability to borrow on the terms associated with
World Bank lending. We understand that Ukraine will only make use
of the UK guarantee if the lending is consistent with advice on
debt sustainability and any limits agreed with the IMF.
HM Treasury has approved this guarantee. It is also normal
practice that any contingent liabilities should not be incurred
until 14 sitting days after Parliament has been notified of the
Government’s intention to incur a contingent liability. If any
member of the House has questions or objections, do get in touch.
