In recent years, the Ukrainian economy has shown marked improvement, with export growth being a key indicator. By 2021, the import and export of goods almost equalised, while export of services remained ahead of imports. In particular, since 2019 wholesale trade has risen 43%, retail by 24% and overall exports by 77%, while imports rose by 39%.
Amid this growth, Russia's invasion of Ukraine in February 2022 caused enormous damage and losses and represented a major hit impeding the progress that Ukraine's national economy was experiencing. Despite this setback, after overcoming the initial shock Ukrainian businesses rapidly began recovering and renewing their operations.
Today export is essential to Ukraine's economic future. Ukraine must have access to world markets and expedite the inflow of foreign currency in order to ensure output growth and fight inflation. So, despite the nation's current infrastructure, logistical and insurance issues, Ukrainian manufacturers, and import/exporters are on the hunt for new business opportunities.
Opportunities have already started to emerge. In May, the European Parliament made a historical decision to cancel all import duties for Ukrainian exporters for one year, and the US exempted Ukraine from a 25% tariff on steel, also for one year. Similarly, the UK cancelled all tariffs and quotas in mutual trade with Ukraine and further having signed in August the second annex to the Political, Free Trade and Strategic Partnership Agreement between Ukraine and the United Kingdom of Great Britain and Northern Ireland, approved the simplification of mutual access to the public procurement market. These generous policies by Ukraine's western partners have created vast new markets for Ukrainian exporters.
At the same time, Ukraine also has something to offer exporters and their partners: support from the Ukrainian Export Credit Agency (ECA). Export credit agencies around the world provide loans, insurance, guarantees, consultations, and other forms of support to exporters and importers. The estimated volume of the annual involvement of ECAs in export operations varies between USD 200 billion and USD 2.5 trillion, which makes up as much as 13% of global international trade. These numbers clearly reflect a tendency towards globalisation as manufacturers expand their operations beyond their borders of their states and bring capital flows to their homelands.
Ukraine aims to follow the world’s best practices, which is why the Ukrainian ECA was established in 2017. To operate effectively, the Ukrainian ECA overcame a number of obstacles: undercapitalisation, distrust of banks and a lack of specialists in export crediting. Now the Ukrainian ECA is standing firm. It is a member of the Berne Union, the main international organisation of ECAs, and has been permitted to combine its products with state programmes (e.g. Affordable Credits of 5% to 7% to 9%). Its network of partners in the Ukrainian banking sector is steadily growing. Today, the Ukrainian ECA actively cooperates with three leading Ukrainian state-owned banks and is discussing partnerships with two more prominent Ukrainian banks. Having a share capital of UAH 2 billion (USD 54.7 million), the Ukrainian ECA can offer significant support to local exporters and their partners.
The Ukrainian ECA propose a wide range of products:
- Insurance and reinsurance of export contracts of Ukrainian manufacturers and foreign importers of Ukrainian goods;
- Insurance and reinsurance of credits for Ukrainian exporters and foreign importers;
- Guarantees for Ukrainian banks that credit exporters;
- Guarantees for Ukrainian exporters participating in international tenders;
- Partial compensation of interest rates under export credits;
- Counselling services.
During Ukraine's period of martial law and for two months after its conclusion, insurance will be given under a 0.5% interest rate covering up to 85% or 90% of the value of an exporter's contract depending on the kind of risk the contract bears. This makes the Ukrainian ECA’s services highly attractive. The maximum debt limit per borrower is set individually for each partner bank but cannot exceed UAH 20 million (USD 540,000). In addition, the insurance period is limited to up to one year.
The Ukrainian ECA’s support doesn’t cover exports of raw materials and soft commodities. The preference is given to goods with high added value since these types of products can help Ukraine grow to the level of a developed country. Today, the Ukrainian ECA has supported export operations to the tune of UAH 188 million.
The products listed above can be used in different ways and in various trade and financing structures. There are also plenty of opportunities for cooperation among the Ukrainian ECA, exporters/importers and other (foreign) ECAs and banks, international financial and development institutions, etc. This is the foundation upon which Ukrainian goods and services can be exported worldwide, giving significant confidence to the partners of Ukrainian exporters, and expediting the development of export operations.
We hope that this insight into the workings of the Ukrainian ECA has been helpful. If you have any questions about business opportunities with Ukrainian partners and the financing of export operations to or from Ukraine, please contact us.
