The European Commission is ready to further assist Ukraine, which has been hit hard by a deep recession. The conflict in the East of the country has had a heavy toll on the economy. Last week the Commission proposed new Macro-Financial Assistance (MFA) to Ukraine of up to €1.8bn in medium-term loans. The new MFA programme, which is to be approved by the European Parliament and the Council of Ministers of the EU, is intended to assist Ukraine economically and financially with the critical challenges the country is facing, such as a weak balance of payments and fiscal situation. The intention is also to help the new reform-orientated government strengthen the country and deal with economic and political challenges. The macro-financial assistance proposed today will be linked to certain reform actions.
European Commission President Jean-Claude Juncker said: "Ukraine is not alone. Europe stands united behind Ukraine and the reform agenda of the new government. Our actions speak louder than our words. The European Union has provided unprecedented financial support and today's proposal proves that we are ready to continue providing that support. This is European solidarity in action. As always, solidarity goes hand in hand with commitment to reform, which is urgently needed in Ukraine. We want to help the Ukrainian government to put its reform agenda into practice and trigger real change for the country and its people."
Once the MFA decision has been adopted, a prerequisite for disbursement will be the successful continuation of Ukraine's current IMF programme and the implementation of economic and financial policies in particular that the Commission, on behalf of the EU, and the government of Ukraine will agree on in a Memorandum of Understanding.
The policies that the Commission considers important include further fiscal consolidation, continuation of the comprehensive reforms in the energy and banking sectors, as well as improving overall macroeconomic management. It will also be important to strengthen economic governance, transparency and pursue judicial reforms and the fight against corruption in order to improve conditions for business activity and sustainable growth.
Subject to the adoption of today's Commission proposal by the European Parliament and the Council, the proposed new €1.8bn programme can be implemented in the course of 2015, and in early 2016. It would be the third MFA programme for Ukraine since 2010. In the course of 2014 alone, the Commission disbursed €1.36bn in support of Ukraine under existing programmes. The disbursement of the final tranche of €250m under these programmes could be expected by the spring of 2015, subject to successful implementation by Ukraine of agreed policy measures and a continued satisfactory track record with the IMF programme.
In addition to macro-financial assistance, the EU supports Ukraine through trade preferences, humanitarian assistance development aid and budget support for reforms.
MFA is an exceptional EU crisis-response instrument available to the EU's partner countries experiencing severe balance of payments problems. It is complementary to 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.
For more information on MFA operations, including the above proposed Decision visit http://ec.europa.eu/economy_finance/eu_borrower/macro-financial_assistance/index_en.htm