The National Bank of Ukraine (NBU) recently authorised Ukrainian borrowers to transfer funds overseas to fulfill their obligations pertaining to external loans and borrowings (reimbursable financial assistance) that meet the following criteria:
- secured by a guarantee or a suretyship from an international financial organisation; or
- extended with the participation of a foreign export credit agency or foreign state through an authorised institution or foreign legal entity, with foreign state or foreign state-owned bank among its shareholders.
In this connection the NBU also emphasised that residents will have the opportunity to conduct such transactions in accordance with the repayment terms and interest payments specified in the loan agreement.
According to the NBU’s projections, the implementation of this relaxation measure will significantly exceed the outflow of funds resulting from the repayment and servicing of existing loans, leading to a substantial influx of new credit funds into Ukraine. The NBU believes that permitting the transfer of funds abroad for the repayment of specific categories of external loans and borrowings will enhance the conditions for attracting funds to Ukraine. Additionally, these changes are expected to facilitate the expansion of opportunities for international partners to direct financing towards the recovery of the Ukrainian economy.
The NBU has introduced these decisions to ease foreign exchange restrictions in light of the stable situation in the foreign exchange market, the sufficiently high level of international reserves and the improved maturity of funds within the banking system. The National Bank also stressed its active engagement in dialogue with the Government of Ukraine and international partners, including the IMF, regarding further relaxation of foreign exchange restrictions.
These aforementioned changes were implemented through Resolution No. 73 of the Board of the National Bank of Ukraine, dated 15 June 2023 “Amendments to Resolution No. 18 of the Board of the National Bank of Ukraine dated 24 February 2022” which will come into effect on 16 June 2023. Specifically, Clause 14 of Resolution No. 18 “Operating Guidelines for the Banking System during Wartime Law” dated 24 February 2022 (“Resolution 18”) has been supplemented with Subclause 42, which allows for these payments.
It is worth noting that a new Clause 19-5 has also been added to Resolution 18, prohibiting the foregoing payments in the event of early performance by the borrowers of their obligations under the loan agreements. Pursuant to Clause 19-5 Ukrainian banks are prohibited from making any changes to the registration details regarding loan agreements that involve the reduction of performance periods (by way of acceleration or otherwise) by borrowers for their obligations under the loan agreements. The NBU in this connection specified that this is a precautionary measure aimed at mitigating unproductive capital outflows, safeguarding international reserves and stabilising the currency market.