Govt debt to Ukrainian banks for 5-7-9% compensation reaches UAH 10 bln, both this program, eOselia require further adjustments – NBU

The Ukrainian government's debt to banks for compensating subsidized interest rates under the government 5-7-9% program is expected to reach approximately UAH 10 billion by the end of 2024, compared to UAH 7 billion in 2023. This program needs to be refocused on projects most in need of funding, according to the December Financial Stability Report of the National Bank of Ukraine (NBU).

Additionally, the report highlights the need to revise the conditions of the eOselia state program.

"Given the improvement in market conditions, state support has lost its decisive role in lending. Moreover, operators of state programs often face funding shortages, making sustained support impossible. Therefore, government lending support programs – primarily Affordable Loans 5-7-9% and eOselia – require revision," the NBU stated in the report.

The central bank projects that by the end of 2024, government debt to banks for compensating rates under the 5-7-9% program will amount to UAH 10 billion. This is up from UAH 5.8 billion as of June 2024 and UAH 7 billion at the end of 2023.

"This creates additional uncertainty for banks and borrowers participating in the program, slowing its operation… The key priority remains the efficient use of available resources and reducing debt. To achieve this, limited resources must be focused on projects most in need of support, such as investment projects," the report said.

First Deputy Governor of the NBU, Kateryna Rozhkova, stated during the presentation of the report that the eOselia program also requires further adjustments to better target the segments and population groups most in need of assistance. She also stressed that the program should not crowd out market-based mechanisms.