17:32 29.05.2018

Council of EU approves EUR 1 bln of financial assistance for Ukraine

4 min read
Council of EU approves EUR 1 bln of financial assistance for Ukraine

The Council of the European Union (EU) on Tuesday approved the provision of financial assistance for Ukraine in the amount of EUR 1 billion, according to a posting on the website of the Council.

"On 29 May 2018, EU ambassadors endorsed, on behalf of the Council, an agreement with the European Parliament on a new package of macro-financial assistance for Ukraine," the Council said.

A further EUR 1 billion in loans will cover Ukraine’s financing needs over a period of two and a half years. The loans will support economic stabilisation and a programme of structural reforms.

According to the posting, the further disbursements will be conditional on Ukraine respecting democratic mechanisms and the rule of law, and guaranteeing respect for human rights.

"The conditions will be laid down in a memorandum of understanding between Ukraine and the Commission. The Commission will be responsible for disbursing the macro-economic assistance. The Commission and the European External Action Service will monitor the fulfilment of the conditions," the Council said.

Parliament, Council and Commission agreed a joint statement in the light of unfulfilled conditions and the cancellation of the third instalment of the previous programme.

"Further macro-financial assistance will be conditional on progress in the prevention of corruption, as well as on the progress of the IMF [International Monetary Fund] programme, the statement reads. The memorandum of understanding will include obligations to strengthen governance, administrative capabilities and the institutional set-up for preventing corruption," the Council said.

According to the joint statement, the economic policy and financial conditions of the Memorandum of Understanding to be agreed between the European Union and Ukraine shall include inter alia obligations to strengthen the governance, the administrative capacities and the institutional set-up in particular for the fight against corruption in Ukraine, notably regarding a verification system for asset declarations, the verification of companies' beneficial ownership data and a well-functioning specialised anticorruption court in line with the recommendations of the Venice Commission. Conditions on combating money laundering and tax avoidance shall also be considered.

"If the conditions are not met, the Commission shall temporarily suspend or cancel the disbursement of the macro-financial assistance," the Parliament, the Council and the Commission said in the joint statement.

The third and last instalment of EUR 600 million of macro-financial assistance was cancelled on January 18, 2018 due to incomplete compliance by Ukraine with the programme of structural reforms attached to this instalment.

In addition, Further to regularly informing the European Parliament and the Council of developments relating to the assistance and providing them with relevant documents, the Commission shall, upon each disbursement, report publicly on the fulfilment of all economic policy and financial conditions linked to this disbursement, in particular those concerning the fight against corruption.

A pre-condition for granting the Union’s macro-financial assistance should be that Ukraine respects effective democratic mechanisms, including a multi-party parliamentary system.

According to the published materials, the loans shall have a maximum average maturity of 15 years. It will be divided into two disbursements, which sizes will be approved additionally. The Union's macro-financial assistance shall be made available for a period of two and a half years, starting from the first day after the entry into force of the Memorandum of Understanding with Ukraine.

The Union’s macro-financial assistance shall be disbursed to the National Bank of Ukraine. Subject to the provisions to be agreed in the Memorandum of Understanding, including a confirmation of residual budgetary financing needs, the Union funds may be transferred to the Ukrainian Ministry of Finance as the final beneficiary.

The EU recalled that since May 2014 Ukraine has received EUR 2.81 billion of macro-financial assistance from the Union. Following its technical mission of November 2017, the IMF revised its estimates of Ukraine's external financing needs, identifying an additional gap of $4.5 billion for 2018 and 2019.

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