F.P. Report
BRUSSELS: The Council today formally adopted the decision to provide € 5 billion of additional macro-financial assistance (MFA) to Ukraine, as a matter of urgency.
On 9 September, EU ministers for finance had agreed a statement in support of these additional €5 billion assistance for Ukraine at the informal Ecofin Council meeting in Prague. Today, this additional assistance was formally adopted, after the necessary formal steps were completed within just 11 days.
This financial assistance complements other EU support to Ukraine in the humanitarian, development, customs and defence fields.
“The European Union stands by Ukraine. We deliver on our promises and help ensure that the Ukrainian state and its key infrastructure can continue to function despite Russia’s war of aggression. At the next Ecofin meetings, I will push for a swift agreement on the provision of the remaining €3 billion, for which we must also agree on the division of this amount into loans and grants.”
Zbyněk Stanjura, Minister of Finance of Czechia
This €5 billion macro-financial assistance will be provided to Ukraine in the form of highly concessional long-term loans. It constitutes the second stage in the implementation of the planned full Union’s exceptional macro-financial assistance to Ukraine for up to €9 billion, announced by the European Commission in its communication of 18 May 2022 and endorsed by the European Council on 23-24 June 2022.
In addition, the decision adopted today equips the EU budget with the means to absorb the risk of losses on these additional loans as well as on the €1 billion loan adopted on 12 July 2022. The latter was fully disbursed in two tranches on 1 and 2 August 2022.
This new MFA operation is part of the extraordinary international effort by bilateral donors and international financial institutions to support Ukraine at this critical juncture.
This decision should be followed swiftly by the adoption of a further decision implementing the third stage of the planned full Union’s exceptional macro-financial assistance for a further amount of up to €3 billion, once the design of that assistance has been determined.
Background
The EU-Ukraine Association Agreement, which entered into force on 1 September 2017, brings Ukraine and the EU closer together. In addition to promoting deeper political ties, stronger economic links and the respect for common values, the agreement has provided a framework for pursuing an ambitious reform agenda, focused on the fight against corruption, an independent judicial system, the rule of law, and a better business climate. The EU has shown continuous support for these reforms, which are crucial for attracting investments, boosting productivity and lifting the standards of living in the medium term.
Among other support instruments, between 2014 and 2022 the EU supported Ukraine through several consecutive macro-financial assistance (MFA) operations that exceeded € 7 billion of loans and grants.
Russia’s unprovoked and unjustified war of aggression against Ukraine since 24 February 2022 has caused Ukraine a loss of market access and a drastic drop in public revenues, while public expenditure to address the humanitarian situation and to maintain the continuity of State services has increased markedly.
The further amount of up to €5 billion of Union’s exceptional macro-financial assistance under this decision is to support Ukraine’s macro-financial stabilisation, strengthen the immediate resilience of the country and sustain its capacity towards recovery, thereby contributing to the public debt sustainability of Ukraine and its ability to ultimately be in a position to repay its financial obligations.
