Coronavirus: Macro-financial assistance agreement signed with Ukraine to limit fallout of pandemic
The Commission, on behalf of the EU i, has signed a Memorandum of Understanding (MoU) with Ukraine on macro-financial assistance (MFA). It is part of the €3 billion MFA package that the Commission proposed for ten enlargement and neighbourhood partners to help them limit the economic fallout of the coronavirus pandemic. The EU has shown solidarity with Ukraine in the face of the pandemic and has mobilised already an assistance package of €190 million in grants to help Ukraine respond to the immediate health crisis and mitigate the socio-economic impact of the pandemic.
MFA funds will be made available in the form of long-term loans on highly favourable terms. The funds will contribute to enhancing macroeconomic stability and mitigating the severe negative socio-economic consequences of the coronavirus pandemic. The MFA programme for Ukraine is worth up to €1.2 billion in two equal instalments.
Valdis Dombrovskis i, Executive Vice-President of the European Commission, responsible for an Economy that Works for People also responsible for MFA to Ukraine, said: “In our response to the crisis, we are looking also beyond our borders to lend a hand to our neighbourhood countries. We are supporting Ukraine with a new Macro-Financial Assistance programme of €1.2 billion. This also shows our continued support to Ukraine's reform agenda. We are pleased to have concluded the negotiations of the Memorandum of Understanding for the new programme. We will continue our strong engagement to support the reform orientation and strategic path that Ukraine has chosen to follow.”
Paolo Gentiloni i Commissioner for Economy, said: “The EU stands by Ukraine and its people in these difficult times. The agreement we have signed today gives Ukraine access to €1.2 billion of macro-financial assistance. It also shows Ukraine's renewed commitment to reforms. This will help Ukraine to face the economic challenges caused by the coronavirus pandemic.”
In the Memorandum of Understanding signed today, Ukraine and the EU have agreed on the policy actions to which Ukraine commits in order to receive the assistance. Specifically, the MoU includes eight policy conditions related to strengthening public finance management, governance and rule of law, competition in the gas market improving the business climate and governance of state-owned enterprises. The assistance programme will be available for a period of 12 months. Aside from the specific policy measures laid down in the Memorandum, Ukraine will also have to keep its IMF programme on track. A clear commitment of Ukraine to central bank independence is an essential precondition for building up confidence and trust and for maintaining good cooperation between Ukraine and its international partners.
Background
MFA is part of the EU's wider engagement with neighbouring and enlargement countries and is intended as an exceptional EU crisis response instrument. It is available to enlargement and EU neighbourhood countries experiencing severe balance-of-payments problems. It demonstrates the EU's solidarity with these countries at a time of unprecedented crisis.
To benefit from MFA, countries must meet the political pre-condition of respect of democratic principles, human rights and the rule of law. They should also benefit from an IMF financial assistance programme. In the context of the COVID19 pandemic, MFA is also available to partners that benefit from emergency funding from the IMF, such as through the Rapid Financing Instrument (RFI).
The Decision on providing macro-financial assistance to ten enlargement and neighbourhood countries in the context of the COVID-19 pandemic was proposed by the Commission on 22 April and adopted by the co-legislators on 25 May 2020.
In addition to MFA, the EU supports the Neighbourhood and Western Balkans through several other instruments, including humanitarian aid, budget support, thematic programmes, technical assistance, blending facilities and guarantees from the European Fund for Sustainable Development to support investment in sectors most affected by the coronavirus pandemic.
For more information
EU macro-financial assistance operations to Ukraine
EVP Dombrovskis statement at the MoU signing ceremony.