CASE STUDY

Ukraine: Finding the Right Financial Solution Under
Fragility and Conflict
The World Bank Treasury helped customize
a USD eq. 1.49 billion IDA-IBRD blended
financing package for the PEACE for
Ukraine Project, allowing the government
to optimize its fiscal space and maintainhealth, education and social protection
services during the war.

BackgroundTo alleviate part of the challenge, the World Bank
approved a USD eq. 1.49 billion Investment Project
Financing to support Ukraine. The financing package
blended a USD eq. 1 billion IDA non-concessional
credit with a USD eq. 492 million IBRD loan. It alsoutilized four bilateral guarantees 1, from the United
Kingdom, the Netherlands, Lithuania, and Latvia, topartially cover IBRD’s exposure to Ukraine.
projecthadThe IBRD portion of the repayment was relatively
flexible but subject to a 12-year ARM for Fast
Disbursing Operations3.
Historically, Ukraine has always selected a level
amortization repayment profile for their IBRD loans,
repaying the same principal amount every semester.
However, this time, a level repayment profile was notto their advantage as it would have led to overlapping
IDA credit and IBRD loan principal repayments during2026-2032 (Figure 1). This would result in a combined
USD eq. 101 million of principal repayments biannually for the government from 2026 to 2032 andcreate a fiscal burden for Ukraine when they would
mostly need fiscal space.
Level amortization for IBRD loanseveral
USD eq. Million

The financing of therepayment constraints.

Ukrainian refugees at the Slovakia border, Adobe Stock

The IDA credit repayment schedule was tight, limitedby eight years of ARM2 and a 10-year final maturity.
The government chose a repayment schedule with biannual installments of USD eq. 84 million, over sixyears (from 2026 to 2032), after a four-year grace
period.

3090

2060

1030

00

Aug-22Aug-23Aug-24Aug-25Aug-26Aug-27Aug-28Aug-29Aug-30Aug-31
Aug-32Aug-33Aug-34Aug-35Aug-36Aug-37Aug-38Aug-39Aug-40The war in Ukraine is devastating the country
economically and socially. According to the UN, as ofthe end of 2022, the human toll showed 18,000
casualties, with an estimated one-third of Ukrainians
being forced from their homes and 8 million fleeing
to neighboring countries. Public finances have also
been a casualty of the war. Despite cuts in nonpriority areas, large social and wage bill spending isneeded to keep the government of Ukraine
operating.

IBRD (left-hand axis)

IDA (right-hand axis)

Figure 1
Bilateral guarantee by highly rated sovereign supports financing to a specificcountry beyond IBRD lending capacity. IBRD is the lender of record but in theevent of a default, the Bank exercise the guarantee and the guarantor will seek
recovery on their own.

1Average Repayment Maturity defines the speed at which a loan is repaid.
Fast-disbursing operations are all DPF, or any IPF or PforR with 60% or moredisbursement from the board approval date.

23

CASE STUDY
Financial Objective

The goal was to maximize the available fiscal space
for the government during the war and later duringreconstruction by smoothing Ukraine’s financial
burden when IDA credit and IBRD loan repayments
overlap.

Financial Solution and Outcome

For this operation, several options were analyzed andbased on the government’s feedback, two options
were further explored.
Option 1 (See Figure 2). The IBRD principal
repayment would start earlier with a lower grace
period than the IDA credit to reduce payments during
the overlapping period by 71 percent compared to
the level repayment profile.

902060103000IBRD (left-hand axis)

IDA (right-hand axis)

Figure 2

Option 2 (See Figure 3). The IBRD and IDA principal
repayments would start simultaneously after a fouryear grace period, however with a lower repayment
amount of the IBRD loan during the overlapping
period, by 25 percent compared to the level
repayment profile, and a higher repayment
afterward.

30902060

103000Aug-22Aug-23Aug-24Aug-25Aug-26Aug-27Aug-28Aug-29Aug-30Aug-31
Aug-32Aug-33Aug-34Aug-35Aug-36Aug-37Aug-38Aug-39Aug-40USD eq. Million

Option 2, customized amortization for IBRD loan

IBRD (left-hand axis)

World Bank Treasury's Role•••30

Aug-22Aug-23Aug-24Aug-25Aug-26Aug-27Aug-28Aug-29Aug-30Aug-31
Aug-32Aug-33Aug-34Aug-35Aug-36Aug-37Aug-38Aug-39Aug-40USD eq. MillionOption 1, customized amortization for IBRD loan

The government selected Option 2 with the double
objective of (i) maximizing the fiscal space during thewar effort with a longer grace period, and (ii) reducing
the debt repayment burden during the overlapping
period (when the country might need financial
resources for reconstruction).

Identified Ukraine’s potential fiscal burdenwith a level repayment and advocated for acustomized repayment profile.
Highlighted the benefit of customizing theIBRD loan against the level repayment profile
given the country’s situation, working closely with
the World Bank Group Finance and Accounting(WFA).
Designed several financial scenarios to help thegovernment decide the best repayment profilethat would meet Ukraine’s debt and fiscal
challenges in the medium term.

The Treasury team helps borrowers understand andefficiently use the full range of financial products
available from the World Bank to meet their specificdebt management or project needs. In Ukraine’s case,the team customized the debt repayment profile toprevent the clustering of high debt repayments. This
allowed the government to maximize its fiscal space
during the war effort.
IDA Financing

IBRD Financing

Amount

USD eq. 1 billion

USD eq. 492 million

Final Maturity

10Y

18.5Y

Grace Period

4Y

4Y

ARM

7Y

12Y

Repayment

level

customized

IDA (right-hand axis)

Figure 3
Contact: Miguel Navarro-Martin, Manager, Financial Products & Client Solutions, The World Bank Treasury
 mnavarromartin@worldbank.org  +1 (202) 458 4722
1225 Connecticut Avenue NW, Washington, D.C., 20433, U.S.A.