Multilateral development banks increase financing for CIS projects

BISHKEK (TCA) — Multilateral development banks (MDBs) increased financing for Commonwealth of Independent States (CIS) projects, including in Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, in Q2 2017 compared to Q1 2017 by 125% or up to US $2.36 billion, according to the Review of Investment Activities of Multilateral Development Banks in Q2 2017, distributed by Eurasian Development Bank’s Strategic and Sector Research Department.

In Q2 2017, MDBs approved financing of CIS projects in Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan, of which 45% is financing of the private sector and 55% is sovereign financing (involving government bodies), the report said.

In Q2 2017, the amount of MDBs’ financing provided to the CIS countries to support investment projects in the private sector increased by the factor of 4.8 compared to Q1 2017, reaching US $1.06 billion. Four international financial institutions (EDB, EBRD, BSTDB, and IFC) approved financing of 22 projects. The EBRD accounts for most of the approved financing.

Most of the projects in the private sector—US $490 million that is 46% of the total amount of contracts approved and signed in Q2 2017 in the private sector—are implemented in the natural resources and mining sector. The bulk of this is the EBRD’s financing to ShalkiyaZinc LTD, an ore mining company, amounting to US $350 million to expand its ore mining at the existing lead-zinc mine Shalkiya in Kyzylorda oblast (Kazakhstan) and build a beneficiation plant at the site.

Kazakhstan accounts for 72% of all the approved and signed projects in the private sector (seven projects totalling US $759 million), Ukraine – for 15% (five projects totalling US $163 million). The EBRD is the key investor in Kazakhstan and Ukraine, supporting respectively six and three projects. In Belarus, three projects totalling US $73 million (7%) were approved and signed, while in Russia there were also three projects signed for the total amount of US $28 million (3%). The World Bank Group (IBRD and IDA), ADB, EFSD, IsDB, AIIB, and EBRD approved financing of 16 projects, including special sovereign loans to governments, technical assistance, and grants totalling US $1.3 billion.

The bulk of sovereign financing provided in Q2 2017 went to the construction sector (38%), with investments at US $500.75 million. This includes a US $500 million loan from ADB and technical assistance of US $750,000 to Uzbekistan to support the state investment programme of housing construction to promote comprehensive rural development.

In this context, Uzbekistan received US $732 million that is 56% of the total. The proceeds have been used to implement projects in the construction, agroindustrial, and transport sectors. Tajikistan accounted for 27% of the total or US $225.7 million, the funds were provided by the World Bank Group to the power generation sector. In Ukraine (12% or US $150 million), most of the investment financing provided by the World Bank Group went to the financial sector.

The increase in the total MDBs’ financing for the CIS countries in Q2 2017 against Q1 2017 is explained by the seasonality factor – in the case of some MDBs, e.g. the World Bank Group, the fiscal year closes at the end of Q2. At the same time, in view of the comparability of financing in the private sector and sovereign lending, the latter remains important for the CIS region, the report concludes.

Sergey Kwan