Second Growth Foundations Development Policy Operation

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The Second Growth Foundations Development Policy Operation (DPO) supports the authorities’ efforts to (i) strengthen the economic policy framework to facilitate a structural shift towards sustainable growth and (ii) enhance macro-financial stability to create a growth-conducive environment. This is the second operation in a programmatic series of two and provides financing of US1.051 billion dollars using International Bank for Reconstruction and Development (IBRD) resources credit-enhanced through the Advancing Needed Credit Enhancement (ADVANCE) Ukraine Trust Fund, supported by the Ministry of Finance of Japan and the Government of the United Kingdom (UK). Disbursement of the portion of the loan guaranteed by the UK is subject to signing the guarantee agreement between the World Bank and the UK. The portion of the loan amount supported by the credit enhancement is subject to the deposit of the equivalent amount of promissory notes by the Ministry of Finance of Japan into the ADVANCE Ukraine Trust Fund. Ukraine’s Ministry of Finance has agreed with the Ministry of Finance of Japan on a partial2 capitalization of interest accruing and fees due under the terms of the loan for the proposed operation for the period for which the operation is active, which would be paid out of the proceeds of the loan and reduce the disbursed amount. Recognizing the importance of increasing growth, the authorities and their international partners have embarked on an ambitious reform agenda. This agenda aims to achieve four outcomes simultaneously: (i) maintaining macroeconomic stability, (ii) accelerating short-term growth through targeted interventions, (iii) strengthening institutional alignment with the EU, and (iv) increasing the country’s medium-term potential growth. Development partner support has been strategically aligned with these areas. The International Monetary Fund (IMF) is supporting a 48-month US$15.6 billion Extended Fund Facility (EFF) program focused on maintaining economic stability. The EU, through the accession negotiation process and the 4-year, EUR50 billion “Ukraine Facility”, supports improved institutional alignment with the EU. The World Bank Group (WBG), in close collaboration with and with financial support from other development multilateral and bilateral partners, has been advising the authorities on structural growth issues and has played a pivotal role in helping mitigate adverse impacts since February 2022.