European Commission Press release Brussels, 20 May 2014 //
Today, the European Commission, on behalf of the EU, disbursed a first loan tranche of €100 million to Ukraine. It was made available from the EU Macro-Financial Assistance (MFA) programme for Ukraine, which is worth €1.61 billion in total. A further €500 million is expected to follow in the coming weeks, once the necessary legal procedures in Ukraine have been finalised, notably the ratification of the Memorandum of Understanding and of the Loan Agreement by the Ukrainian Parliament, the Verkhovna Rada.
In conjunction with this loan disbursement, Commission Vice-President Siim Kallas is visiting Kiev today for a series of meetings with the Ukrainian authorities, including the Prime Minister, Deputy Prime Minister and Finance Minister. Discussions are due to focus on the MFA programme and related economic reforms.
The objective of the MFA programme is to assist Ukraine economically and financially in the current critical stage of its development. It is part of the package to support Ukraine announced by the European Commission on 5 March and endorsed by the European Council on 6 March.
Vice-President Siim Kallas said: "The European Union is fully committed to helping Ukraine address its major economic challenges. This first disbursement marks an important step towards turning that commitment into reality. This assistance, which will soon be followed by a further €500 million, provides much-needed support to Ukraine's efforts to cover its external financing needs."
The EU's MFA will complement the resources made available by the International Monetary Fund (IMF) and other donors in the context of the stabilisation and reform programme recently prepared by the Ukrainian authorities with the help of the IMF. The assistance aims to reduce the economy’s short-term balance of payments and fiscal vulnerabilities.
Beyond today's €100 million disbursement and the €500 million disbursement currently being prepared, subsequent payments will be conditional on the implementation of specific economic policy actions. These are outlined in two Memoranda of Understanding – which were signed in 2013 and 2014 respectively – as well as in the Stand-By Arrangement approved by the IMF Executive Board on 30 April. The MFA, besides supporting Ukraine in its immediate external financing needs, also aims to underpin economic reforms which have been demanded by the Ukrainian people themselves. The conditionality linked to this programme focuses on public finance management and anti-corruption, trade and taxation, the energy sector (including provisions for increased social subsidies for the most vulnerable households) and financial sector reforms.
Macro-Financial Assistance is an exceptional EU crisis-response instrument available to the EU's neighbouring partner countries experiencing severe balance of payments problems. It is complementary to the assistance provided by the IMF. MFA loans are financed through EU borrowings on capital markets. The funds are then on-lent with similar financial terms to the beneficiary countries.
The funding for the €100 million tranche disbursed today was raised on the financial markets on 13 May by the European Commission on behalf of the European Union.