10:02 26.03.2015

European Parliament votes for EUR 1.8 bln loan as macro-financial assistance to Ukraine

2 min read
European Parliament votes for EUR 1.8 bln loan as macro-financial assistance to Ukraine

The European Parliament, by an overwhelming majority, backed the disbursement of a EUR1.8 billion loan to help Ukraine out of economic recession.

MEPs approved the European Commission's proposal, without amending it, by 492 votes to 107 with 13 abstentions at a plenary sitting in Brussels on Wednesday.

Now this decision is to be authorized by the Council of the European Union.

The European Parliament reported on its website that the European Union would borrow the money externally and lend it on to Ukraine with the same interest rate. The disbursement will be tied to Ukraine pledging structural reforms to tackle problems that contributed to the current crisis.

Terms for the loan still need to be agreed by the EU and Ukraine in a memorandum of understanding which commits Ukraine to a reform program designed to remedy the accumulated fundamental weaknesses that helped to cause the current deficit. The draft deal includes public finance management reforms, anti-corruption measures, tax administration changes; reforms in the energy and financial sectors; and measures to improve the business environment.

Once the EU and Ukraine sign the deal, the money will go straight into Ukraine's budget. Two thirds of the agreed amount might be disbursed by the end of 2015 and the final tranche in the first quarter of 2016.

The European Commission reported after the EP's voting that it welcomes the decision to approve the EC's proposal for new EUR 1.8 billion macro-financial assistance (MFA) to Ukraine. "The clear backing by the European Parliament underlines the EU's commitment to continue its unprecedented support to the country, which has been hit hard by a deep recession," the EC said.

"The MFA 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 new MFA program is now to be finally approved by the Council of Ministers of the EU," the EC said.

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