Today I have laid a departmental minute which describes a new liability the Foreign, Commonwealth and Development Office (FCDO) is 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 commitment to guarantee up to $3 billion of additional lending by the World Bank to the Government of Ukraine. This new commitment to Ukraine, which would likely be split into several separate guarantees, will create a contingent liability of up to $5.6 billion (£4.6 billion) (once interest payments are accounted for). Once existing UK guarantees to support Ukraine are accounted for, the maximum amount which could be demanded from the UK in a single year would be approximately £402 million. 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.
The 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 misses a repayment by 180 days.
The exact length of the liabilities will be linked to the financial terms agreed 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. The international finance community, including development banks such as the World Bank, is playing a key role in providing rapid financial support. Ukraine’s IMF programme is helping to mobilise combined donor support worth $115 billion over the next four years—up to 2027.1 This package is promoting macroeconomic and financial stability, hailing a shift from ad-hoc unpredictable funding to effective multi-year assistance. The UK’s latest set of loan guarantees will form a part of this package and will help enable the World Bank to continue providing reliable and significant financial support at a critical time.
The exact length of the liability created by this commitment will be linked to the financial terms agreed between the World Bank and the Government of Ukraine.
HM Treasury has approved this new contingent liability in principle with the FCDO. 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, please do get in touch.
A copy of the departmental minute has been placed in the House Library.
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