EU offers second tranche of €5 billion macro-financial assistance to Ukraine

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The European Commission today offered an additional €5 billion in macro-financial assistance (MFA) loans to Ukraine as part of the second part of the announced exceptional MFA package of up to €9 billion in the Commission communication of May 18, 2022 and approved by the European Council of June 23 and 24, 2022. The Commission disbursed the first billion euros of this AMF envelope at the beginning of August. The remaining 3 billion euros will be paid out as soon as possible.

Today’s proposal is part of the EU’s extraordinary efforts, alongside the international community, to help Ukraine meet its growing financial needs following the provoked and unjustified by Russia. This is a key element of the comprehensive short-term liquidity relief measures announced by the Commission in May 2022 and contributes significantly to closing the ongoing funding gap for the fourth quarter to ensure the maintaining stability. The proposal will complement support already provided by the EU, including an emergency MFA loan of €1.2 billion disbursed in the first half of the year. Taken together, the two strands of the program would bring total AMF support to Ukraine since the start of the war to €7.2 billion, and could reach up to €10 billion once the MFA’s comprehensive package outstanding to Ukraine will be operational this year.

Under the proposal, MFA funds will be made available to Ukraine in the form of long-term loans on favorable terms, to be disbursed in a small number of tranches. In another expression of solidarity, the EU budget will cover the interest and administrative costs linked to the loans. As with all previous MFA loans, the Commission will borrow the funds on the international capital markets and transfer the proceeds on the same terms to Ukraine.

Loans to Ukraine will be backed by guarantees provided by Member States which will complement the provisioning available from the EU budget. Between EU budget provisions and member state guarantees, the loans will be fully guaranteed up to 70% of their value.

As soon as the European Parliament and the Council have approved today’s proposal and the corresponding Memorandum of Understanding and loan agreement with the Ukrainian authorities have been signed, the Commission will rapidly make available the EUR 5 billion euros.

This financial assistance comes on top of the unprecedented support provided by the EU to date, including humanitarian and development aid from the EU budget, and military aid through the European Facility for peace, the suspension of all import duties on Ukrainian exports for one year or another solidarity initiatives, for example to address transport bottlenecks so that exports, especially grain, can be assured.

College members said:

President Ursula von der Leyen said: “EU support for Ukraine is unwavering. We support his brave people with our hearts, minds and deeds. Today, the Commission is presenting a proposal for additional macro-financial assistance of €5 billion to help Ukraine meet its immediate financial needs caused by Russia’s brutal invasion. Ukraine must win this war: it must regain the freedom and independence for which it is fighting so bravely. The EU will continue to play its part to make this happen – solidarity will prevail and peace will come.”

Valdis DombrovskyExecutive Vice President for An Economy that Works for People said, “Ukraine is an economy at war, with immense costs just to keep functioning on a daily basis due to Russia’s protracted war of aggression. Ukraine urgently needs short-term support to maintain essential public services and achieve some degree of economic and financial stability. By providing an additional €5 billion in exceptional macro-financial assistance, the EU demonstrates once again its commitment to support Ukraine. We call on EU Member States to quickly provide additional guarantees. This will be the second part of the global package of €9 billion of exceptional macro-financial assistance announced by the European Commission.

joseph BorrellHigh Representative/Vice-President for a Stronger Europe in the World, said: “Today’s unprecedented disbursement of macro-financial assistance is another clear example that the EU stands with the Ukrainian people and their institutions against Russian aggression. With this additional support, the EU continues to contribute to building a modern, democratic and independent Ukraine.”

Johannes HahnCommissioner for Budget and Administration, said: “Our proposal today for the disbursement of an additional €5 billion in macro-financial assistance loans confirms our unwavering support for Ukraine. This payment is the second part of the exceptional MFA of up to €9 billion announced by the Commission on May 18.

Paulo GentiloniCommissioner for the Economy, said: “Six months into Russia’s brutal war of aggression, the courage of the Ukrainian people and the resilience of their institutions continue to inspire us all. The pressure on Ukraine’s finances requires strong solidarity from its global partners and I am proud that the European Commission has been at the forefront of these efforts. Today, we are taking another decisive step to help our struggling neighbor with this proposal for an additional €5 billion in macro-financial assistance. As previously announced, up to an additional €3 billion will follow. We will not waver in our support for Ukraine and its people.

Background

The EU has already provided significant assistance to Ukraine in recent years under its MFA programme. Since 2014, the EU has provided over €5 billion to Ukraine through five MFA programs to support the implementation of a broad reform agenda in areas such as the fight against corruption, an independent judiciary, the rule of law and improving the business climate . In addition, earlier this year, the Commission provided an emergency MFA loan of €1.2 billion, for which the Commission raised funds through two private placements in the first half of 2022. The 18 May, the Commission presented plans in a Communication for the an immediate response to close Ukraine’s financing gap, including through an exceptional package of MFAs of up to €9 billion, as well as longer-term reconstruction framework. The first billion euros of AMF’s exceptional envelope was disbursed in two equal tranches on August 1 and 2.

To fund the MFA, the Commission borrows on capital markets on behalf of the EU, alongside its other programs including NextGenerationEU and SURE. The possible borrowing for Ukraine is foreseen in the Commission’s financing plan for the second half of 2022.

Macro-financial assistance (MFA) operations are part of a broader EU engagement with neighboring countries and are designed as an exceptional EU crisis response instrument. They are available for countries neighboring the EU with serious balance of payments problems. In addition to the MFA, the EU supports Ukraine through several other instruments, including humanitarian aid, budget support, thematic programmes, technical assistance and blending facilities to support investment.

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