Today, the Verkhovna Rada of Ukraine adopted the Law ‘On Ratification of the Agreement between the Government of Ukraine and the Government of the Republic of Poland on the Activities of Bank Gospodarstwa Krajowego in Ukraine’ (Draft Law No. 0363). This document creates a direct legal basis for the operation of the Polish state-owned bank BGK in Ukraine, opening up new opportunities for financing reconstruction and development, particularly at the local level.

Bank Gospodarstwa Krajowego (BGK) is a Polish state-owned bank specialising in financing development projects. It is an executive partner of the European Commission and is authorised by the Government of the Republic of Poland to provide financial and technical assistance to Ukraine pursuant to the Ukraine Plan.

The agreement explicitly identifies local governments (municipalities) as one of the key beneficiaries of BGK assistance. From now on, communities will have another powerful tool to attract resources for the implementation of their own projects.

Key provisions of the Agreement beneficial to communities:

1. Direct financing of local governments: Pursuant to Article 3 of the Agreement, BGK has the right to provide financial assistance in the form of loans, grants or guarantees not only to the Government of Ukraine, but also to any state institution, including local governments, as well as state-owned or private companies. This means that cities and communities can become direct recipients of funding for their infrastructure and social projects.
2. Support for development priorities: The activities of BGK are aligned with Ukraine’s investment priorities and the Ukraine Plan. This ensures that funds will be directed towards goals that are truly important to communities, such as the restoration of critical infrastructure, energy efficiency, the modernisation of utilities, among others.
3. Technical assistance and capacity building: BGK will provide not only financing but also technical assistance. Article 3 provides for training and capacity building for public and private entities. This will enable local government officials and utility companies to improve their capacity to prepare and implement investment projects.
4. Flexibility of financial tools: The bank will be able to provide guarantees to Ukrainian banks, which will facilitate lending to local projects. It will also be possible to make direct payments to suppliers and contractors, including foreign ones, which will simplify the implementation of projects involving international partners.
5. Special regime of activity: The agreement stipulates that the activities of BGK are considered cross-border and are not subject to the regulation of the National Bank of Ukraine applicable to commercial banks. This creates simplified operating conditions for BGK, which in turn accelerates the implementation of projects and reduces the cost of financing for beneficiaries, in particular communities.

Local governments have gained another source of funding for restoration and development, which has a clear legal basis and support at the state level. Cooperation with BGK will allow communities to implement projects in compliance with international standards, with the possibility of receiving both financial and expert support.