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EBRD signs up US$ 100 million credit line agreement for Russian banks
Russian medium and large private sector enterprises will benefit from a US$ 100 million credit line financed by the European Bank for Reconstruction and Development (EBRD) in an agreement signed today with the Russian government in London. The credit line represents the continuation of the Bank's involvement in the Russian Government's Post-privatisation Enterprise Support Project (ESP).
Ron Freeman, First Vice President of the EBRD, said at the signing ceremony, "This programme increases EBRD financing to restructure private sector companies in Russia and to strengthen Russian commercial banks."
The Russian Deputy Prime Minister Dr Alexander Shokhin, commented, "The benefits of the ESP to the Russian economy are significant. Through the ESP, guaranteed and arranged by the Russian Government in co-operation with the EBRD and the World Bank, a group of selected banks will channel significant loans to private enterprises across the nation. The project, being a part of the first large scale programme of international financial institutions oriented in co-operation with Russian banks, could have a real multiplying effect."
With an estimated 14,000 medium and large sized companies now privatised, the Russian banking system has to cope with the rapidly increased demand for commercial banking services. The EBRD credit line will go to a group of up to 40 Russian commercial banks who will on-lend the funds to Russian enterprises which are at least 75% privately owned.
Capital investment is a significant key for the future development of many newly privatised companies. The credit line will enable the banks to provide loans to renew or restructure Russian plants and provide working capital, assist in the diversification of product lines and enable firms to seize investment and growth opportunities in an increasingly open and competitive market.
This programme is closely related to another joint World Bank/EBRD programme for US$ 300 million to strengthen commercial banking in Russia. The World Bank/EBRD team, with technical assistance funds, is selecting a group of Russian banks which will receive operational, technological and financial support from the international banking community to play an important and key role in the transformation and restructuring of the Russian economy.
The EBRD was invited by the Russian Government and the G-7 countries to participate in both projects in April 1993. The World Bank is also providing a US$ 200 million loan to each of the projects.
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