Trade Finance In Wartime

(Global Finance, New York, 3 January 2023) According to the World Bank, Ukraine’s GDP over 2022 will have contracted by some 35%. Further decline is expected for 2023, as the full economic implications of Russia’s war become clear. The huge drop-off in trade has of course severely impacted trade finance. Many of the correspondent banks that used to do regular business pulled away, while long-term financing projects have been pretty much shelved across the board. ECA coverage is scarce in the extreme. In many cross-border transactions, cash is king. The international media has rightly focused on the huge disruptions to supply lines, including shipments of Ukrainian grain from Black Sea ports, and Russian targeting of Ukraine’s energy infrastructure has cast much of the population into freezing darkness and has massively disrupted business. With foreign banks and customers understandably jittery, the role of international financial institutions like the International Finance Corporation in guaranteeing transactions has been key. The European Bank for Reconstruction and Development (EBRD) has firmly committed to supporting Ukraine. Ukrexim’s Shchur echoes this, “At such a fateful time, we really want to encourage prominent foreign banks and ECAs to become more actively involved in trade finance operations here.