This article is brought to you in collaboration with the European Commission.
The Commission today disbursed the first tranche of €2 billion under the €5 billion exceptional macro-financial assistance (MFA) operation for Ukraine. This is part of a package of MFAs of up to €9 billion, announced in the Commission’s press release of May 18 Communication on emergency aid and the reconstruction of Ukraine and approved by the European Council on 23 and 24 June 2022. It is part of the extraordinary efforts made by the EU, alongside the international community, to help Ukraine meet its immediate financial needs following the Russia’s unprovoked and unjustified aggression.
The Commission has already disbursed the first billion euros of this exceptional MFA envelope on 1 and 2 August 2022. This followed a previous emergency MFA loan of 1.2 billion euros disbursed to Ukraine during the first half of this year. With today’s payment, the total amount of MFA aid disbursed to Ukraine since the February 24 Russian attack has reached €4.2 billion.
The funds were made available to Ukraine in the form of highly concessional loans, with longer maturities than ordinary MFAs and on very favorable terms. The assistance supports Ukraine’s macroeconomic stability and overall resilience in the context of Russian military aggression and the resulting economic challenges. In another expression of solidarity, the EU budget will for the first time cover the interest costs of this loan, at least for the current multiannual financial framework. As with all previous MFA loans, the Commission borrows funds on international capital markets and transfers the proceeds on the same terms to Ukraine. This €2 billion loan to Ukraine is 70% covered by funds from the EU budget (for 9%) and by national guarantees from the Member States (for the remaining 61%).
Today’s payment was made after Ukraine complied with the reporting requirements set out in the Memorandum of Understanding signed with the Commission and aimed at ensuring the efficiency, transparency and accountability of the use of funds. For subsequent payments, Ukraine will need to demonstrate satisfactory progress in implementing policy actions related to economic resilience and stability, governance and rule of law, and energy. These political conditions were agreed with Ukraine in the Memorandum of Understanding and are considered feasible and relevant in the current situation of Russia’s war against Ukraine, also for the future reconstruction of the country.
This financial assistance comes on top of the unprecedented support provided by the EU to date, including humanitarian, development and defense aid, the suspension of all import duties on Ukrainian exports for a year or other solidarity initiatives, for example to address transport bottlenecks so that exports, particularly of cereals, could be ensured.
The disbursement of the following tranches under this envelope of 5 billion euros will follow quickly and is planned before the end of the year.
In addition, work on the remaining €3 billion part of AMF’s exceptional global envelope of up to €9 billion is ongoing, alongside work on a more strategic and predictable approach to financial assistance. from the EU to Ukraine in 2023.
College members said:
President Ursula von der Leyen said:“The EU supports Ukraine with financial, humanitarian and military support as well as sanctions against the Russian aggressor. EU Member States host millions of Ukrainian refugees. Today, we are once again delivering on our unwavering commitment to support Ukraine. The €2 billion disbursed today will help meet Ukraine’s acute financing needs. Further financial support will follow before the end of the year.
Valdis DombrovskyExecutive Vice President for An Economy that Works for People said, “Today’s EU disbursement of €2 billion in emergency financial assistance to support Ukraine and its people is timely as winter approaches and continued aggression brutality of Russia. This is the first part of the second stage of the implementation of the macro-financial assistance program planned by the EU to Ukraine, for a maximum amount of 9 billion euros. We are working to unlock the remaining €3 billion of this package for later this year and more structured emergency assistance to follow in 2023. Today’s disbursement will strengthen Ukraine’s immediate resilience, l will help maintain essential services and maintain its recovery capability. The EU remains committed to supporting emergency aid, rehabilitation and reconstruction in Ukraine, together with international partners and financial institutions.”
Johannes HahnCommissioner for Budget and Administration, said: “Today’s disbursement of €2 billion from the AMF’s exceptional envelope demonstrates our unwavering support for Ukraine. It allows the country to cover operating costs and the most urgent needs. Further disbursements will follow before the end of the year”.
Paulo GentiloniCommissioner for the Economy, said: “After today, the Russian terror campaign continues, deliberately targeting Ukrainian civilians and critical infrastructure and demonstrating to the world the moral bankruptcy of Putin’s regime. And day after day, Ukrainians are demonstrating to the world their incredible courage and The European Union’s solidarity with the people of Ukraine is unwavering and today’s payment of €2 billion is another sign of this commitment, with more to follow in the weeks and months to come. »
The EU has already provided significant assistance to Ukraine in recent years under its macro-financial assistance programme. Between 2014 and 2021, the EU has provided over €5 billion to Ukraine through five macro-financial assistance programs to support the implementation of a broad reform agenda in areas such as fight against corruption, an independent judiciary, the rule of law and improving the business climate.
To finance macro-financial assistance, the Commission borrows on the capital markets on behalf of the EU. The borrowing for Ukraine is foreseen in the Commission’s financing plan for the second half of 2022.
Macro-financial assistance 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 macro-financial assistance, the EU supports Ukraine through several other instruments, including humanitarian aid, budget support, thematic programmes, technical assistance and blending facilities to support investment.
The decision on the new exceptional macro-financial assistance operation of €5 billion was adopted by the European Parliament and the Council on 20 September 2022. Today’s disbursement comes after the Commission and Ukraine signed, on October 3, a memorandum of understanding setting the political conditions and enhanced reporting requirements related to this exceptional MFA.