Commission disburses further €2 billion in exceptional macro-financial assistance to Ukraine

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

The Commission has today disbursed a first instalment of €2 billion under the €5 billion exceptional macro-financial assistance (MFA) operation for Ukraine. This is part of an MFA package of up to €9 billion, announced in the Commission’s 18 May Communication on Ukraine Relief and Reconstruction and endorsed by the European Council of 23-24 June 2022. It is part of the extraordinary effort by the EU, alongside the international community, to help Ukraine address its immediate financial needs following the unprovoked and unjustified aggression by Russia.

The Commission already disbursed the first €1 billion of this exceptional MFA package on 1 and 2 August 2022. This followed a previous €1.2 billion emergency MFA loan paid out to Ukraine in the first half of this year. With today’s payment, the total MFA support disbursed to Ukraine since the Russian attack on February 24 has reached €4.2 billion.

The funds have been made available to Ukraine in the form of highly concessional loans, with longer-term maturities than under regular MFAs and on highly favourable terms. The assistance supports Ukraine’s macroeconomic stability and overall resilience in the context of Russia’s military aggression and the ensuing economic challenges. In a further expression of solidarity, the EU budget for the first time will cover the interest costs on this loan, at least for the current multiannual financial framework. As for all previous MFA loans, the Commission borrows funds on international capital markets and transfers the proceeds on the same terms to Ukraine. This €2 billion loan to Ukraine is being covered for 70% of its value by funds set aside from the EU budget (for 9%) and by national guarantees by the Member States (for the remaining 61%).

Today’s payment was made after Ukraine complied with reporting requirements laid out in the Memorandum of Understanding signed with the Commission and aiming to ensure the efficiency, transparency and accountability of the use of the funds. For subsequent payments, Ukraine will have to demonstrate satisfactory progress towards the implementation of policy actions related to economic resilience and stability, governance and rule of law and energy. These policy conditions were agreed with Ukraine in the Memorandum of Understanding and are deemed feasible and relevant in the current situation of Russia’s war against Ukraine, also for the future reconstruction of the country.

This financial assistance comes in addition to the unprecedented support provided by the EU to date, notably humanitarian, development and defence assistance, the suspension of all import duties on Ukrainian exports for one year or other solidarity initiatives, e.g. to address transport bottlenecks so that exports, in particular of grains, could be ensured.

Next steps

The disbursement of the subsequent instalments under this €5 billion package will follow swiftly and are planned before the end of the year.

In addition, work on the remaining €3 billion part of the overall exceptional MFA package of up to €9 billion is ongoing, in parallel to work on a more strategic and predictable approach of EU financing support for Ukraine in 2023.

Members of the College said:

President Ursula von der Leyen said:“The EU is standing by Ukraine through financial, humanitarian and military support as well as sanctions against the Russian aggressor. EU Member States are welcoming millions of refugees from Ukraine. Today we are once again delivering on our unwavering commitment to support Ukraine. The €2 billion paid out today will help address Ukraine’s acute financing needs. Additional financial support will follow before the end of the year.”

Valdis Dombrovskis, Executive Vice-President for An Economy that Works for People said: “Today’s EU disbursement of €2 billion in emergency financial assistance to support Ukraine and its people is timely as winter approaches and Russia continues its brutal aggression. This constitutes the first part of the second stage of implementing the EU’s planned macro-financial assistance package to Ukraine of up to €9 billion. We are working on unlocking the remaining €3 billion of this package for later this year and for more structured emergency support to follow in 2023. Today’s disbursement will strengthen Ukraine’s immediate resilience, help it to maintain essential services and sustain its capacity towards recovery. The EU remains committed to supporting Ukraine’s relief, rehabilitation and reconstruction, together with international partners and financial institutions.”

Johannes Hahn, Commissioner for Budget and Administration, said: “Today’s disbursement of €2 billion of the exceptional MFA package is evidence of our unwavering support for Ukraine. It enables the country to cover the running costs and most pressing needs. Further disbursements will follow before the end of the year”. 

Paolo Gentiloni, Commissioner for Economy, said: “Day after today, the Russian campaign of terror continues, deliberately targeting Ukrainian civilians and critical infrastructure and demonstrating to the world the moral bankruptcy of the Putin regime. And day after day, Ukrainians demonstrate to the world their incredible courage and resilience. The European Union’s solidarity with the Ukrainian people is unwavering and today’s €2 billion payment is another sign of that commitment. More will follow in the coming weeks and months.”

Background

The EU has already provided significant assistance to Ukraine in recent years under its macro-financial assistance programme. Between 2014 and 2021, the EU provided over €5 billion to Ukraine through five macro-financial assistance programmes to support the implementation of a broad reform agenda in areas such as the fight against corruption, an independent judicial system, the rule of law, and improving the business climate.

To finance the macro-financial assistance, the Commission borrows on capital markets on behalf of the EU. The borrowing for Ukraine is foreseen in the Commission’s funding plan for the second half of 2022.

Macro-financial assistance 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. In addition to macro-financial assistance, the EU supports Ukraine through several other instruments, including humanitarian aid, budget support, thematic programmes, and technical assistance and blending facilities to support investment.

The decision on the new exceptional €5 billion macro-financial assistance operation was adopted by the European Parliament and the Council on 20 September 2022. Today’s disbursement comes after the Commission and Ukraine signed on 3 October a Memorandum of Understanding laying down the policy conditions and the enhanced reporting requirements linked to this exceptional MFA.