EU disburses €600 million in Macro-Financial Assistance to Ukraine

This article is brought to you in association with the European Commission.

The European Commission, on behalf of the EU, has today disbursed €600 million in Macro-Financial Assistance (MFA) to Ukraine. Following Russia’s unprovoked and unjustified invasion, this urgent financial support helps Ukraine address its acute financing gap related to its exceptional humanitarian and defence needs. The first instalment of €600 million from this emergency Macro-Financial Assistance operation was disbursed in two tranches on 11 and 18 March.

These funds are provided to Ukraine in the form of long-term loans on highly favourable terms. They contribute to financing part of the sizable funding gap of the country, estimated by International Financial Institutions at around $15 billion for the second quarter of 2022. This Macro-Financial Assistance is enhancing Ukraine’s macroeconomic stability and supporting the continuous operation of state functions at this critical juncture. The disbursement is a tangible demonstration of the EU’s unwavering support for Ukraine.

The disbursement follows an assessment of the authorities’ progress with implementing the structural policy measures agreed in the Memorandum of Understanding. The Commission has concluded that the authorities, overall, have taken action towards the implementation of the agreed conditionality. However, the current war circumstances constitute an event of force majeure that impedes the effective completion of the structural policy measures. As an exceptional response to the acute financing needs of Ukraine, and since the conditionality cannot be achieved at this stage for reasons of force majeure, the Commission decided to proceed with the disbursement of the second tranche as a matter of urgency.

Members of the College said:

President Ursula von der Leyen said: “In these extremely difficult times, the EU unwaveringly stands in support of Ukraine and of its courageous people. Today, we disbursed €600 million in emergency Macro-Financial Assistance to address Ukraine’s acute financing needs, thereby ensuring it can keep on running essential services and addressing basic daily needs. Today’s disbursement is the last tranche of the €1.2 billion financial aid package I announced at the end of January. Going forward, the EU will continue to provide short-term financial support to Ukraine while accompanying it in its long-term reconstruction, in line with the plans announced on Wednesday. Ukraine will get back on its feet as a democratic and prosperous country”.

Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People said: “Europe has not flinched from supporting Ukraine in the face of Russia’s relentless military aggression. Since this invasion began, the EU has provided €4.1 billion to help Ukraine and its people. This includes €1.2 billion in emergency macro-financial assistance – and today, we paid out €600 million to Ukraine as the second tranche of this programme. The EU will continue to provide financial support: this week, we announced new exceptional macro-financial assistance of up to €9 billion in loans and started working on a financial plan for Ukraine’s long-term reconstruction.”

Paolo Gentiloni, Commissioner for Economy said: “Two days after we announced our new plan to support Ukraine financially in both the short and long term, today we bring further relief to the country’s budget with the disbursement of the remaining €600 million in emergency macro-financial assistance decided earlier this year. This is a further meaningful contribution to Ukraine’s immediate financing needs, which are under unprecedented pressure due to Russia’s invasion. We stand in solidarity with Ukraine today and will do so tomorrow.”

Background

Macro-financial assistance (MFA) operations are part of the EU’s wider engagement with neighbouring countries and are intended as an exceptional EU crisis response instrument. They are available to EU neighbourhood countries experiencing severe balance-of-payments problems.

Since the Russian aggression started, the EU has significantly stepped up its support, mobilising around €4.1 billion to support Ukraine’s overall economic, social and financial resilience in the form of macro-financial assistance, budget support, emergency assistance, crisis response and humanitarian aid.

Addressing Ukraine’s significant short-term financial support to sustain basic services, to address humanitarian needs and to fix the most essential destroyed infrastructure will require a joint international effort, in which the Union will be ready to play its part. On 18 May, the Commission set out plans in a Communication for the EU’s immediate response to address Ukraine’s financing gap, as well as the longer-term reconstruction framework. With this Communication, which follows from the European Council call to address the consequences of the war in Ukraine via a dedicated Europe-led effort, the Commission envisages to propose granting Ukraine in 2022 additional macro-financial assistance in the form of loans of up to €9 billion, to be complemented by support from other bilateral and multilateral international partners, including the G7.