Government approves legislation package initiated by ministry of finance to deliver debt relief for debtors

The Cabinet of Ministers of Ukraine has approved a legislation package meant to support citizens and companies which took loans in hard currency. The package also includes the draft law «On financial restructuring» and «On the restructuring of the liabilities of citizens of Ukraine under loans in hard currency which were taken to purchase a single residential property (mortgage loans)». The two laws were elaborated by the Ministry of Finance jointly with the National Bank of Ukraine and the Independent Association of Ukrainian Banks.

The Ministry of Finance is actively working to resume the economic growth of Ukraine and is taking steps to restore the loan supply of the Ukrainian economy as well as to tackle the debt burden on citizens and businesses in Ukraine.

One of the problems hindering the recovery of a dynamic economic growth in Ukraine is the inaccessibility loans for the economy which is due to a big number of bad loans preventing banks from funding new projects. The other side of this problem is the excessive debt burden on companies and citizens which is the result of the economic crisis, lost international markets or the devaluation of the Ukrainian currency.

One of the main issues for many Ukrainian families are their mortgage loans in hard currency taken before the crisis of 2008. And a major problem for many viable companies which are diligent debtors is their current lack of liquidity resulting in their inability to serve their debt or to take new loans. As a result, many businesses are now on the verge of bankruptcy, which can lead to the increase of unemployment and further deteriorate the economic situation in the country.

That is why the Ministry of Finance jointly with the National Bank has been looking for a solution to the issue of the bad debts of citizens and businesses. Today, at the Government’s meeting, Minister of finance Natalie Jaresko has presented draft laws aimed to effectively resolve these problems.

Presenting the draft law «On the restructuring of the liabilities of citizens of Ukraine under loans in hard currency which were taken to purchase a single residential property (mortgage loans)» at the Government’s meeting, Natalie Jaresko emphasized that this draft law is in position to solve the problem of the mortgage loans in hard currency in a fair way for the most vulnerable citizens.

«We think that the hard currency loans should be restructured only for citizens who took them to buy residential property for their own needs and can lose it now due to their inability to re-pay the loans. This is the only fair solution for the rest of the citizens most of whom did not take any loans and lived on their own income», Natalie Jaresko said.

There are approximately 37000 households in Ukraine entitled for restructuring. Their pending loans amount more than UAH 20bln. The approved draft law poses no danger for the banking system: it is agreed with the 19 biggest banks in Ukraine which own 75% of the assets in the Ukrainian banking system.

One more presented draft law - «On financial restructuring» - is aimed to settle the issue of the excessive debt burden on viable companies and thus to return them to business as well as to boost banking loans for the economy.

«The approach of this draft law can give companies with an effective and potentially successful business model an opportunity to solve their solvency problems, to avoid bankruptcy and thus to return to growth», Natalie Jaresko said.

However, this draft law cannot be misused to dodge payments on loans. To avoid the abuse and manipulation of the law, affiliated parties of debtors will not have a possibility to influence the restructuring process. Companies which are not viable, won’t be able to enjoy this law either.

Next week the legislation package will be submitted to the Parliament for examination and discussion.