European Bank for Reconstruction and Development (EBRD)

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The European Bank for Reconstruction and Development was established in 1991 during the collapse of the communist regime in Eastern Europe. At that time, the former states of the Soviet Union were in dire need of support for the formation of a revitalized private sector under reigning democracy. Currently, EBRD instruments are being effectively used to establish a market economy and adapt to democracy in 34 countries around the world.

EBRD core activities

The European organization works only for commercial purposes, charity is not included in its tasks. The EBRD lends only to specific projects. In addition to targeted lending, the bank makes direct investments and provides technical support. The authorized capital of the financial institution is equal to 10 billion dollars, and the level of ECU corresponds to 12 billion dollars. A controlling stake in the organization (51%) is owned by the EU countries. Contributions to the organization are accepted in any freely convertible currency. The main goals for which initiallythe European Bank for Reconstruction and Development was formed, is:

• Funding the supply of road transport.
• Financing and supply of equipment.
• Provision of technical assistance to state and commercial structures, enterprises.
• Private sector lending, accounting for about 60% of total loans.

The subtleties of the EBRD's work

The bank uses the US dollar and ECU together with the Japanese yen as the unit of account. Branches of the financial giant open and provide a full range of services in all countries that took part in the establishment of the institute. Offices operate on the territory of Russia and Ukraine. The Bank carefully controls the intended use of all funds that it provides as loans. In addition to financing, the International Bank issues recommendations and organizes a wide variety of training courses for bankers and managers. The Institute provides professional assistance in food distribution. It is worth saying that the financial institution does not have its own funds in order to provide technical support. It accumulates funds for this purpose through funds operating in the territory of the EU countries.

Specific activity

The main form of EBRD financing is loans and equity investments or guarantees. The main office of the organization is located in London. Important participants in the association are not only statesworld, but also the European Community with the European Investment Bank. Each member state of the organization (58 countries in total) has its own representative on the board of governors and on the board of directors. The main advantage that distinguishes the European Bank for Reconstruction and Development is its deep knowledge of the region in which it is planned to carry out financial transactions. The management of the institution is well aware of all the complexities and potentials of the countries with which the partnership is conducted. The EBRD (bank) offers its support only to those states that follow a market economy, pluralism or multi-party democracy. Another strength of the institute is the ability to take risks, which allows to significantly expand the boundaries of commercial potential. The EBRD meets the highest AAA credit rating, which makes it possible to raise capital on the international market on the most favorable terms.

Functions and more

The International Bank provides member countries with comprehensive support in carrying out not only structural, but also sectoral reforms, including demonopolization and privatization, which are aimed at integrating the private economy into the world economy. To implement this task, active assistance is being provided.

1. Small and medium-sized enterprises are helped in organizational matters, in terms of modernization and expansion of production, in building a competitive policy.
2. The Bank promotes the mobilization of both foreign and national capital. Support is provided in the proper management of funds.
3. The organization promotes investment in production to create competitiveness and to improve the quality of life, increase productivity.
4. Helps in technical preparation, in financing, in project implementation, in stimulating the capital market, in environmentally sustainable development, in making large-scale projects involving several recipient countries at the same time.

Commitment to sustainability

In addition to multilateral lending, the EBRD is a strong advocate of green prosperity. Each of the bank's projects is subject to strict requirements in terms of nature protection. Funding is systematically carried out to improve municipal and other infrastructures. Energy-saving technologies are financially encouraged. The area of nuclear safety is another priority area for the EBRD. Russia and some other countries in this matter are under close control of the bank. The financial institution is responsible for the distribution of funds, which are created to minimize the hazards in the operation of nuclear power plants in different regions of the world. The International Bank, working simultaneously with many countries of the world, has its own approach to each state. It not only develops, but also implements programs for the needs of each member state of the system.

EBRD in Ukraine

The European Bank for Reconstruction and Development is one of the largest investors in Ukraine. financial institutionoffers its support in various industries, including the financial sector and small commercial companies. The priority areas for the financial institution are: agriculture and transport infrastructure, municipal services and the energy sector, television communications. The Chernobyl Shelter Fund is also under the control of the EBRD. Ukraine receives assistance from the organization in the aspect of the restoration of Chernobyl, its transformation into an absolutely safe and ecologically clean zone.

Actual aid to Ukraine

The main office of the EBRD in Ukraine operates in Kyiv. The staff of specialists includes the best experts from various sectors of the economy. An active dialogue is constantly maintained with the government of the state. The European Bank makes a great contribution to the prosperity of business and to the improvement of the investment climate. In 2015, the financial institution plans to invest about $3.5 billion in projects to develop the state's economy. The funds are planned to be used for Ukrainian pipes, for increasing the number of jobs, for the development of Ukrainian companies, for infrastructure projects, for education and medicine. This will be the most global investment that can restore the productive forces of the state.

EBRD and Russia

The EBRD, against the background of recent events and the economic situation in Russia, presented an updated, but worsened forecast for the development of the economy. In 2015, according to the representatives of the bank, GDP is expected to decline by about 4.8%. The unhe althy investment environment that formed after the imposition of sanctions on the state in 2014 was only exacerbated by the decline in oil prices. Consumer demand will be reduced due to the depreciation of the national currency, due to an increase in interest rates on loans. Unaffordable retail loans will be unaffordable for ordinary families, which will reduce demand, which has already fallen by 50% last year. The collapsing Russian economy in 2015 will leave a negative imprint on the development of such countries as Kazakhstan and Azerbaijan, Turkmenistan and Belarus, and Armenia. According to EBRD forecasts, Russia could get into a much worse situation if oil prices continue to fall and the conflict with Ukraine escalates.