The Council decided today provide an additional €1 billion in macro-financial assistance (MFA) to Ukraineemergency.
With the €1.2 billion emergency MFA disbursed earlier this year, total EU macro-financial support to Ukraine since the start of the war now reaches 2.2 billion euros and it should increase further In the coming months. This financial assistance complements other EU assistance to Ukraine in the humanitarian, development, customs and defense fields.
Pursuing material and financial assistance is not an option, but our duty. I am therefore very happy that we have accelerated the decision to provide EUR 1 billion of macro-financial assistance. This will provide Ukraine with the necessary funds to cover urgent needs and ensure the functioning of critical infrastructure.
Zbyněk Stanjura, Minister of Finance of the Czech Republic
The MFA adopted today aims to meet Ukraine’s immediate and most urgent financing needs and ensure that the Ukrainian state can continue to perform its most critical functions. It takes the form of a highly concessional agreement long term loan. It will have an availability period of one year and will be disbursed in a single installment, which may be split into one or more tranches. This new AMF operation is part of the extraordinary international effort by bilateral donors and international financial institutions to support Ukraine at this critical time.
The release of the tranche and the assistance will take place once a memorandum of understanding has been concluded with the Ukrainian authorities. It will include improved transparency and reporting on the use of funds and define the establishment of reporting requirements to which this MFA will be bound.
In view of the extremely difficult situation Ukraine is facing, the EU budget will exceptionally cover the interest charges arising from the MFA, in the form of a loan, thus limiting the impact on the viability country’s budget. In this way, the EU will provide additional financial assistance to Ukraine and help improve the sustainability of its public debt. The EU will put in place a long-term loan to give Ukraine as much time as possible to return to growth, rebuild its economy in line with its European aspirations and maximize the chances of full repayment.
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 ties and respect for common values, the agreement provided a framework for the pursuit of an ambitious reform program, focused on the fight against corruption, a system independent judiciary, the rule of law and a better business climate. The EU has provided continued support for these reforms, which are essential to attract investment, boost productivity and raise living standards in the medium term.
Among other support instruments, between 2014 and 2021 the EU supported Ukraine through five consecutive macro-financial assistance (MFA) operations which totaled € 5 billion loans.
Russia’s war in Ukraine is having a detrimental effect on Ukraine’s already precarious economic and financial stability. In particular, it caused a major outflow of capital.
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