The European Bank for Reconstruction and Development was created during the collapse of the communist regime in Eastern Europe in 1991. At that time, the former states of the Soviet Union urgently demanded support for the formation of a renewed private sector under reigning democracy. Currently, the EBRD's instruments are effectively used to establish a market economy and to adapt to democracy in 34 countries located around the world.
The main activities of the EBRD
The European organization works only for commercial purposes, charity is not part of its tasks. EBRD projects lend only specific ones. In addition to targeted lending, the bank makes direct investments and provides technical support. The authorized capital of a financial institution is equivalent to 10 billion dollars, and the ECU level corresponds to 12 billion dollars. The controlling stake in the organization (51%) is the property of the EU countries. Contributions to the organization are accepted in any freely convertible currency. The main goals for which the European Bank for Reconstruction and Development was originally formed are:
- Financing the supply of road transport.
- Financing and supply of equipment.
- Providing technical assistance to state and commercial structures, enterprises.
- Private sector lending, which accounts for about 60% of the total amount of loans granted.
The intricacies of the EBRD
As the bank's unit of account, the American dollar and ECU are used together with the Japanese yen. 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 in Russia and Ukraine. The Bank carefully monitors the intended use of all the 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 the distribution of food. It is worth saying that the financial institution does not have its own funds in order to provide technical support. He accumulates funds for this purpose through funds operating in the EU.
Activity specifics
The main EBRD financing format is loans and equity investments or guarantees. The main office of the organization is located in London. Important members of the association are not only the states of the world, but also the European Community with the European Investment Bank. Each member state of the organization (a total of 58 countries) 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 acquainted with all the complexities and potentials of the countries with which the partnership is being conducted. The EBRD (bank) offers its support only to those countries that follow a market economy, pluralism or multi-party democracy. Another strength of the institute is the ability to take risks that can significantly expand the boundaries of commercial potential. The EBRD meets the highest AAA credit rating, which makes it possible to raise capital in 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 global economy. To implement this task, active assistance is provided.
- Small and medium-sized enterprises are helped in organizational matters, in the aspect of modernization and expansion of production, in building a competitive policy.
- The Bank promotes the mobilization of both foreign and national capital. Support is provided in the competent management of funds.
- The organization promotes investment in production to create competitiveness and to improve the quality of life, increase productivity.
- It helps in technical preparation, in financing, in implementing projects, in stimulating the capital market, in environmentally stable development, in realizing large-scale projects in which several recipient countries are involved simultaneously.
Environmental commitment
In addition to multilateral lending, the EBRD is an active supporter of green prosperity. Each of the bank's projects has stringent requirements in terms of environmental protection. Funding for improving municipal and other infrastructures is systematically carried out. Energy-saving technologies are financially encouraged. The nuclear safety area is another priority area for the EBRD. Russia and some other countries are closely monitored by the bank in this matter. The financial institution is responsible for the distribution of funds that have been created with the aim of minimizing the dangers during 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. He 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. The financial institution offers 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 environmentally friendly zone.
Actual assistance to Ukraine
The head office of the EBRD in Ukraine operates in Kiev. The staff of experts includes the best experts from various sectors of the economy. 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 economy. Funds are planned to be spent on Ukrainian pipes, on increasing the number of jobs, on developing Ukrainian companies, on infrastructure projects, on education and medicine. This will be the most global investment that can restore the state’s productive forces .
EBRD and Russia
Against the background of recent events and the economic situation in Russia, the EBRD presented an updated but worsened forecast for the development of the economy. In 2015, according to representatives of the bank, a fall in GDP of about 4.8% is expected. The unhealthy investment environment that emerged after the sanctions were imposed 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. Inaccessible retail loans will be unbearable for ordinary families, which will cause a decrease in demand, which has fallen by 50% last year. The collapsing Russian economy in 2015 will leave a negative imprint on the development of countries such as Kazakhstan and Azerbaijan, Turkmenistan and Belarus, Armenia. According to the EBRD forecasts, Russia could get into a much worse situation if oil prices continue to fall, and the conflict with Ukraine worsens.