Ukraine’s central bank has lifted restrictions on domestic firms’ repayments on loans backed by foreign export credit agencies (ECAs), wagering that the move will help attract much-needed foreign investment and financing for imports.

The National Bank of Ukraine slapped a wide-ranging ban on cross-border currency transfers and purchases of foreign currency last year, immediately after Russia’s invasion of the country.

The prohibition included the repayment of principal and interest on loans extended by foreign lenders, a decision that contributed to most ECAs suspending coverage of Ukraine.

But the central bank announced last week that, from June 16, Ukrainian borrowers are again permitted to make repayments on overseas loans that are secured by a guarantee from an international financial institution or were “granted with the participation” of a foreign ECA or another government-owned agency.

The central bank says it “estimates that as a result of this easing, new credit inflows to Ukraine will significantly exceed the outflows due to the repayment and servicing of existing loans”.

“Allowing fund transfers abroad to repay some categories of external loans will improve conditions for attracting funds to Ukraine. In addition, these changes will help expand the ability of international partners to channel funds towards the recovery of the Ukrainian economy.”

The bank had already eased other aspects of the general foreign payments ban, including for imports. It also allowed repayments on loans for essential goods required by the country’s armed forces.

The bank says it felt able to loosen the restrictions “in view of the stable situation on the FX market, the sufficiently high levels of international reserves, and the increased maturity of funds in the banking system”.

The decision was welcomed by the Berne Union, which represents the global credit insurance industry, including ECAs. “We’re happy to see that the National Bank of Ukraine has recognised the importance of maintaining access to ECA-backed finance by enabling currency transfer for servicing this kind of external debt,” the association’s secretary-general Paul Heaney tells GTR. “This is certainly a positive outcome in terms of enabling the industry to continue supporting businesses that are actively invested in or trading with Ukraine.”

“Berne Union members are actively discussing the different ways in which our industry is able to support Ukraine. There is no doubt that export credit will have a significant role to play in supporting economic reconstruction.”

Some ECAs, including the Export-Import Bank of the United States, Export Development Canada, UK Export Finance and Poland’s Kuke had already restored coverage for transactions involving Ukrainian borrowers.

Kuke welcomed the decision by the Ukrainian authorities and says its turnover on cover for trade with Ukraine has already exceeded pre-2019 levels.

“We tried to convince the Ukrainian side to take such a decision through various channels, suggesting it will open up the country for an influx of new investment projects,” says Piotr Maciaszek, Kuke’s director of insurance and international relations.

“This is great news at the right time,” he adds. “Kuke was involved in long-term projects in Ukraine, guaranteeing payments to Polish banks and contractors. Now, after unlocking the possibility of repaying overdue liabilities, it will be feasible to talk about new projects so desperately needed to rebuild Ukraine’s infrastructure and modernise the whole economy. Polish business wants to participate in reconstructions and we at Kuke are ready to support it.”

Ukraine’s own ECA last year called on its overseas counterparts to restore coverage of Ukrainian exporters as part of its allies’ support for the war-torn country, including through reinsurance of the domestic agency’s cover.