The European Bank for Reconstruction and Development (EBRD) has decided to start investing in the Czech Republic after a 13-year hiatus, the bank’s board of directors announced after meeting on Wednesday, thus complying with the Czech government’s request. The EBRD will re-engage in investment projects to help mitigate the effects of the Covid-19 pandemic on the economy, focusing on the private sector.
“The EBRD will only be involved for a transitional period, up to a maximum of five years. Its presence will be limited in scope. We will complement the support provided by the European Investment Bank (EIB) together with the European Union,” the bank stated.
The EBRD is currently concentrating all its activities on helping pandemic-affected countries. It has set aside €21 billion for these purposes for 2020 and 2021, and it wants to focus on supporting the real economy and infrastructure development.
“Our request for resumption of EBRD investments received strong support, especially from other European shareholders. I believe that assistance in the form of loans, technical assistance, or capital investments from the EBRD can accelerate the recovery of the Czech economy after the coronavirus pandemic,” said Czech Minister of Finance Alena Schillerová.
According to the Finance Ministry, the EBRD will operate in the Czech Republic in the field of green investments, renewable resources and infrastructure, digitization, information and communication technologies, and within the financial sector.
The Bank’s board of directors will not approve the exact amount that the EBRD could invest in the Czech Republic as it depends on the specific projects and the market situation.
“We expect it to be in the range of €100 million to €200 million a year. It could be more, but also less,” estimated Charlotte Ruhe, EBRD Executive Director for Central and Southeast Europe.
The bank can also use the so-called leverage effect when investing, which means that by including money from other sources, the total amount can be several times higher than how much the EBRD itself will invest. The bank intends to contribute both through direct investments and in cooperation with private capital.
We are planning to resume investing in Czech Republic following #COVID19 pandemic again for the first time since 2008.
— The EBRD (@EBRD) March 24, 2021
The EBRD was established in 1991 to help the countries of the former Eastern bloc to 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, meaning it would not receive any more money from the EBRD. In this respect, the Czech Republic is the only EBRD country. However, Czechia remained a shareholder in the EBRD, and the bank still has its investment portfolio in the country.
The Czech government approved a request for the renewal of EBRD investments on March 1. The bank will assess further steps concerning the Czech Republic in three years.
Title image: The European Bank for Reconstruction and Development (EBRD) logo (ebrd.com)