Ukraine`s government on Tuesday asked its state banks to borrow up to $3.7 billion on foreign debt markets to fund mortgage lending in return for raising their charter capital. Under the 2009 budget draft law, Ukraine`s Oshchadbank and Ukreximbank and the state mortgage institute will receive 500 million hryvnias (just over $100 million) to boost their charter capital. "We are giving them the opportunity to borrow cheap money on foreign markets worth more than six times their charter capital," Prime Minister Yulia Tymoshenko said at a public presentation of the budget draft.

"This cash will be set at up to 18 billion hryvnias. It can be received via Oshchadbank and Ukreximbank with a minimal first down payment and at low rates, naturally, for 25-30 years."

The central bank has recently tightened consumer lending and increased payment requirements, worried that the domestic debt market would overheat and in an attempt to cool inflation. At the same time, the construction sector has slowed.

She did not say, however, who could lend to the banks under the current expensive and illiquid climate in the debt markets thanks to the credit crunch sparked last year by the collapse of low standard mortgage lending.

Reuters via Guardian