Today, I have laid a departmental minute which describes a new liability the Foreign, Commonwealth and Development Office (FCDO) are undertaking to support the economic stability of Ukraine following Russia’s invasion in February 2022.
It is normal practice, when a Government Department proposes to undertake a contingent liability in excess of £300,000 for which there is no specific statutory authority, for the Minister concerned to present a departmental minute to Parliament giving particulars of the liability created and explaining the circumstances; and to refrain from incurring the liability until 14 parliamentary sitting days after the issue of the statement, except in cases of special urgency.
This departmental minute sets out details of a new liability undertaken by the FCDO. The liability is a further guarantee to support $500 million of additional lending by the World Bank to the Government of Ukraine. This guarantee has an expected maximum exposure of up to £676 million—once interest payments are accounted for. The guarantees will be denominated in USD. I have separately notified the Chairs of the Public Accounts Committee, Foreign Affairs Committee and International Development Committee.
FCDO will guarantee both principal and interest repayments from Ukraine to the World Bank. A UK pay-out would be triggered if the Government of Ukraine miss a repayment by 180 days.
The exact length of the liabilities is linked to the terms of the agreed financing between the World Bank, and the Government of Ukraine. The World Bank’s lending is expected to have a maturity of 29 years and a seven-year grace period during which only interest payments are due.
The war has placed huge pressures on Ukraine’s economy, with a large and unmet fiscal deficit emerging across 2023. The international finance community, including development banks like the World Bank, have stepped in and are playing a key role in providing rapid and reliable financial support at a critical time. This guarantee will help the Government pay for essential services like salaries and social services and contribute toward Ukraine’s economic stability.
Ukraine is currently undertaking an IMF programme known as a programme monitoring with board involvement. We continue to engage with the IMF and the Government of Ukraine to assess Ukraine’s willingness and ability to borrow on the terms associated with World Bank lending. We understand that Ukraine will only make use of the UK guarantee if the lending is consistent with advice on debt sustainability and any limits agreed with the IMF.
HM Treasury has approved this guarantee. It is also normal practice that any contingent liabilities should not be incurred until 14 sitting days after Parliament has been notified of the Government’s intention to incur a contingent liability. If any Member of the House has questions or objections, do get in touch.
A copy of the departmental minute has been placed in the Library of the House.
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