The World Bank on Friday announced approval of a $400 million loan to boost Ukraine's banking sector, which has been shaken by a confidence crisis and a run on banks amid a severe recession.
Deposits in Ukraine’s banks plunged by 30 percent from September 2008 through May this year, according to the World Bank, as worried customers rushed to withdraw their savings and convert them into foreign currency.
The run on banks prompted a painful government ban on early deposit withdrawals and contributed to a collapse of the national currency, the hryvna, which lost nearly 45 percent of its value to the dollar since September.
“We hope that our loan will help to bolster confidence in the banking system in Ukraine, and thus lay the foundation for recovery and economic restructuring post-crisis,” Martin Raiser, World Bank Country Director for Ukraine, Belarus and Moldova said in a statement.
Ukraine’s financial crisis has been one of the worst in Europe. The economy is expected to shrink by 15 percent this year after nearly a decade of robust growth due to a fall in global demand for steel and chemicals, the country’s top exports, according to the World Bank. Inflation is forecast to reach 13 percent.
The country is relying on a separate $16.4 billion loan from the International Monetary Fund to avoid a complete meltdown, but has struggled to fulfill the fund’s strict stabilization criteria.
