EBRD, EIB and World Bank turn on the financing tap

Newsroom 16/03/2009 | 15:06

“The European Bank for Reconstruction and Development (EBRD) is considering a EUR 100 million loan for Banca Comerciala Romana (BCR) in order to provide medium- and long-term financing to private companies for production, investment, trade, services and working capital needs. The BCR loan is due to be submitted to the board of directors, which has to approve all projects before they are implemented, on March 24,” Anthony Williams, head of media relations for the EBRD, told Business Review.

The oil and gas company Petrom, controlled by Austrian company OMV, also awaits the EBRD's approval for a EUR 300 million corporate unsecured loan on the same day. According to EBRD information, the Petrom loan will be used to finance a series of projects aiming at rehabilitating or enhancing the environmental and health and safety performance of facilities in the Exploration and Production (E&P) and Refining divisions of Petrom.

The financing pipe has been opened wide at the European Investment Bank (EIB) as well. Dusan Ondrejicka, information officer at the bank, told BR that there were three companies with operations in Romania which have knocked on the EIB's door seeking financing since the beginning of the year. The bank is considering issuing EUR 100 million to Immorent Austria, to finance small and medium-sized projects to be carried out in new member states, and an EUR 80 million loan for the same purpose requested by Bancpost. Ford Europe has also asked up to EUR 600 million from the EIB for the technical rehabilitation of the Craiova plant.

These companies aren't the only ones to jump at the opportunities offered by the international financial institutions.

“The International Financial Corporation (IFC) is discussing with different banks potential cooperation over crisis initiatives, mainly oriented towards micro, small and medium enterprises and agribusiness. The IFC is financing banks for on-lending to specific sectors with high development impact or offering credit guarantees to help banks continue their lending activity in key sectors, like infrastructure,” Andreia Radu, investment officer at the IFC, Southern Europe and Central Asia department, told BR.

International lenders join forces for SEE support

The EIB representative says, “Within the recent months in Romania, as well as in other countries of the region, the economic situation has weakened markedly. The current situation is marked by a protracted financial crisis and more widespread economic downturn resulting from a liquidity squeeze, capital constraints and declining confidence.”

This lies behind the latest move from the international financial institutions. The EBRD, EIB Group, and the World Bank Group have pledged to provide up to EUR 24.5 billion to support the banking sectors in the region and to fund lending to businesses hit by the global economic crisis.

“The EBRD is preparing a significant increase in its investments in Romania this year from over EUR 300 million last year. The priorities this year are to support the real economy by helping to ensure banks are in a position to carry on lending to small and medium-sized enterprises and also working particularly in the energy and energy efficiency areas,” said Anthony Williams.

According to EBRD data, the bank has invested about EUR 3.8 billion in 249 projects in Romania up until now and helped mobilize a further EUR 7.2 billion from external sources.

The IFC official says that, “The crisis threatens to undermine significant economic growth that has been achieved over the past several years, and many countries are facing a pullback in investment, a sharp decline in business and consumer confidence, local currency devaluation, and rising unemployment.”

According to Eurostat, the unemployment rate in the Euro zone reached 8.2 percent in January, up to 13 million people, the highest level since 2006.

Crisis impacts on the financing accessing rate

Recently, President Traian Basescu stressed that Romania mustn't allow itself to lose such an important source of liquidities, but unfortunately an unused one, up until now. According to his statements, Romania has access to funds of EUR 3.55 billion from the EIB and the World Bank which have not been used.

“Romania has already started to pay fees for some of these loans for not using the money, fees which reach millions of euros annually,” said the president.

His statements relate to a recent announcement made by a World Bank (WB) official. Some existing loans from the International Bank for Reconstruction and Development (IBRD), part of the World Bank, might be restructured, due to issues related to their implementation, said Orsalia Kalantzopoulos, manager for Central Europe, Central-South, and Baltic states, during a recent visit in Romania.

According to Finance Ministry information, the restructuring allows for the partial or total annulment of some loans with an unsatisfactory level of implementation followed by a reallocation of those funds through IBRD instruments, based on a common analysis of the Romanian institution and the World Bank.

EIB data reveals that Romania accessed EUR 6.2 billion between 1990 and 2008, and is way behind Poland, for instance, which implemented projects costing EUR 18.3 billion during the same period.

This state of affairs is surprising considering that the international financial institutions do not require collateral from the companies or institutions which access the funding.

“We don't request specific guaranties, but we specifically request the money be used for this specific purpose,” confirms the EBRD representative. The EIB official told BR, “The IFC has specific eligibility criteria in order to track the development impact of the respective projects. We have launched or expanded five facilities aimed at addressing problems experienced by the private sector: microfinance enhancement facility, expanded trade finance program, IFC recapitalization fund, infrastructure crisis facility and the IFC advisory services. IFC loans to the banking sector are in most cases unsecured.”

Authorities and private players in the economy have their work cut out both accessing these funds and then implementing the projects, an even harder task in Romania.

Dana Ciuraru

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