1. The Ukrainian Municipal Credit Market Development V.G. Кozyr Executive Director of the Ukrainian Municipal Development Fund

2. Brief information about Ukraine Ukraine is an Eastern European country The population of Ukraine is about 48 million people The area of Ukraine is 604 square kilometers Kyiv is the capital of Ukraine There are 30,000 localities in Ukraine There are 1,340 towns in Ukraine

3. The main objective of the Project: Creation of sustainable local borrowing system for the investment requirements of the local self-goverment bodies (BLSG) financing and the development of a Municipal Credit Market in Ukraine

4. The main targets of the Project Improvement of the intergovernmental fiscal policy arrangements Improvement of the regulatory and legal framework for local borrowing Providing technical assistance to the BLSG during the borrowing process Providing technical assistance to the commercial banks - the BLSG lenders The Ukrainian Municipal Credit Market Development

5. Principles of the Project arrangement Transparency and openness Creation of the conditions to the BLGS development based on market principles Provision of technical assistance to the BLGS to improve their financial position Improvement of the regulatory and legal framework for local borrowing Encouragement for Ukrainian banks to enter a new line of business - BLGS lending

6. The main objectives of the Ukrainian Municipal Development Fund (UMDF): Providing the access to the long-term funds Improving of the BLSG’s solvency Improving municipalities’ use of strategic planning and their budget and project management Increasing of the commercials banks safety and interest in providing long-term loans for the BLSG and enterprises providing municipal services to the population Preparing reforms to the regulatory and legal framework that provide for the creation of a more favourable environment for the BLSG financing of priority public projects

7. UMDF Organizational Chart Supervisory Board Executive Director Assistant to ED Regions Coordinator Financial Management Specialist Procurement Specialist Banking Specialist Chief Accountant

8. General arrangements of the Project World Bank Application to determine eligibility Ministry of Finance of Ukraine UMDF US$ 150 million Loan ФРМУ Commercial banks ФРМУ Cities (towns) Lending Selection Recommendation of eligibility Technical assistance

9. Project ideology :  Creation of a Municipal Credit Market as the financial basis of the economic growth at the local level  Quality improvement of the municipal financial management and the implementation of the responsible financial policy  Economic growth stimulation at the local level  Co-financing of the investment projects: - local budget (20%) - lending (80%)

10. Project ideology (continuation)  Foreign exchange risk  Credit risk The Ministry of Finance of Ukraine Commercial banks

11. Eligible selection criteria for municipalities: The availability of a technical project and feasibility study for the project Adherence to the legislative limitation as to loan size and total debt outstanding Project confirmity with priorities of the municipal strategical development plan Budget parameters meet minimum standards for consideration of additional debt Eligible projects for financing under the project framework Local authorities positively disposed to new approaches to debt finance and project implementation Proper practice of the BLGS of qualitative financial management

12. Water and Waste Water Collection Treatment and Distribution Systems District Heating Electricity Metering Systems Urban Transport Rehabilitation of Local Roads Recreative objects others Eligible Capital Investment

13. Directions of the technical assistance provision for municipalities Training programs for conducting a feasibility study of the investment projects Implementation of the full functional system of the fiscal management Transition to the strategic budget planning Development of the responsible debt policy

14. The main difficulties of the project implementation No experience with previous loans to local authorities for capital investment Imperfection and unpredictability of the intergovernmental fiscal arrangements between the state and local budgets Recent reduction of revenue for local budgets as a consequence of income tax reform Augmentation of the salary expences in the local budget structure and reduction of capital expences