Government’s Debt to Banks for Subsidized 5-7-9 Loan Program Mounts – Sky Bulletin

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As reported by OTP Bank’s senior executive, Volodymyr Mudryi, the state allocated ₴16 billion in 2023’s fiscal budget for bank rate compensations as part of the Affordable Loans 5-7-9% Program. However, the Entrepreneurship Development Fund concluded the year with considerable debts to these financial institutions. ₴18 billion is expected to be earmarked for the program in 2024. Without increased funding, the program is unlikely to progress at the desired pace. Despite these challenges, there is confidence that the government will settle its debts with the banks, as support from international financial organizations persists. In the event of the state’s inability to support banks and enterprises through such preferential schemes, the sector will not face an overwhelming crisis, based on the belief that dependency on state funds should lessen. It’s pertinent to mention that at the start of 2024, compensations due under the program were up to ₴7 billion, and the state has not fulfilled its compensation obligations to banks for nearly half a year as of mid-February.

 

FAQ Section

What is the Affordable Loans 5-7-9% Program?

The Affordable Loans 5-7-9% Program is a state-backed initiative aimed at providing small and medium-sized businesses with access to reduced-interest loans. The percentages – 5%, 7%, and 9% – refer to the potential interest rates available to qualifying businesses under this program.

How much has the Ukrainian government set aside for the program in 2023?

For the year 2023, the Ukrainian government has allocated ₴16 billion to compensate banks for the reduced interest rates they offer to businesses under the program.

What is the extent of the government’s debt to banks under this program?

By the beginning of 2024, the government had accumulated a debt of ₴7 billion in unpaid compensations to banks as part of the Affordable Loans 5-7-9% Program.

Have the banks received any compensation payments in recent times?

No, as of mid-February, banks have not received compensation payments for about five months.

Is there a concern for the program’s future?

There are concerns that the program might not develop at the required pace if the current funding issues continue. However, optimism remains that the debts will be settled and that international financial institutions will continue providing funds.

Conclusion

The Ukrainian government’s Affordable Loans 5-7-9% Program aims to bolster small and medium-sized businesses by enabling them to obtain loans at favorable interest rates. Despite the allocation of funds in the state budget geared at reconciling the program’s compensation to banks, a significant debt remains. The program’s future dynamics depend on the resolution of these financial constraints, but there is an overarching sentiment that moving away from heavy reliance on the state could prove beneficial for the sector, suggesting a need for diversification in support for enterprises. Continuation of international aid amidst the state’s fiscal challenges emits a ray of hope for the sustainability of the program.

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