The European Bank for Reconstruction and Development (EBRD) will reinvest in the Czech Republic after a thirteen-year hiatus. At today’s meeting, the decision was made by the bank’s board of directors, which thus complied with the Czech government’s request. The EBRD will re-engage in investment projects to help mitigate the effects of the pandemic on the economy. It will focus on the private sector.
“The EBRD will only participate for a transitional period, for a maximum of five years. Its presence will be limited in its scope,” the bank told ČTK. “We will complement the support provided by the European Investment Bank (EIB) together with the European Union.”
The EBRD is currently concentrating all its activities on helping pandemic-affected countries. It has set aside € 21 billion for 2020 and 2021(over CZK 550 billion) and wants to place emphasis on supporting the real economy and developing infrastructure. It has already spent over 11 billion euros last year , a record. The Czech Republic is one of the countries most affected by the pandemic in Europe.
The exact amount that the EBRD could invest in the Czech Republic is not approved by the Board of Directors. It always depends on the specific projects and the market situation.
“We expect it to be in the range of 100 million to 200 million euros(2.6 billion to 5.2 billion CZK) per year. It can be more, but also less, “said Charlotte Ruhe, EBRD Executive Director for Central and South-Eastern Europe, in an interview with CTK.” and to push through reforms in some sectors, we could do more than without these changes, “she added.
The EBRD pointed out that the transition to so-called green energy remains a priority for the Czech Republic. The energy sector is almost double the European Union average and the country is one of the largest producers of greenhouse gases in Europe. About 75 percent of the heat comes from burning coal. The EBRD can therefore offer its experience in improving the regulatory environment for renewable energy sources and support investments to increase the efficiency of the energy sector through credit lines.
The bank can also use the so-called leverage effect when investing, which means that with the involvement of money from other sources, the total usable amount can be several times higher than how much the EBRD itself invests. The bank intends to contribute to the assistance both through direct investments and in cooperation with private capital. The support will go to companies that have lost revenue due to the pandemic, but also to companies that have found new growth opportunities but do not have the money to enforce their plans. The Bank invests venture capital to support innovative and innovative SMEs that are expected to grow strongly.
“Financing the real economy will also facilitate the further development of the local capital market,” said the London-based bank.
The EBRD was established in 1991 to help the countries of the former Eastern bloc transition to a market economy. Later, it expanded its operations to the countries of the Middle East and Central Asia. The Czech Republic is one of the founding members of the EBRD. The bank stopped investing in the Czech Republic at the end of 2007, when the country applied for so-called graduation so that it would not receive any more money from the EBRD. In this respect, the Czech Republic is the only EBRD country. However, the Czechia remained a shareholder in the EBRD and the bank still has its investment portfolio in the country.
Since 1991, the bank has invested more than 145 billion euros (3.8 trillion CZK) in more than 5,700 projects. EBRD investments in the Czech Republic reached EUR 1.2 billion (CZK 31.5 billion) and went to 109 projects with a total value exceeding EUR 5.2 billion.
The Czech government approved the EBRD’s request for two investments on March 1. The bank will assess further progress in relation to the Czech Republic in three years.
Source: CTK and Patria-cz
