Financial Rehabilitation Development Policy Loan 1

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The objectives of the First Programmatic Financial Rehabilitation Development Policy Loan Program are to: (i) support a sound banking sector recapitalization program and restructuring process; (ii) enhance the legal framework for bank resolution; and (iii) strengthen the deposit insurance payout functions. Ukraine is a lower middle income country. It lags its eastern European neighbors in structural reforms, but has made important progress in some key areas, such as World Trade Organization (WTO) membership. Ukraine is an open economy and strongly supports closer integration with the European Union, and a new association agreement is under negotiation to be signed in the near future, including a deep and comprehensive Free Trade Agreement (FTA), which will anchor important institutional and structural reforms. At the same time, the country continues to suffer from corruption, despite a significant improvement in the environment for voice and participation since the political events of late 2004, often referred to as the 'orange revolution'.