Today, the European Commission has disbursed half of the EUR500 million of a new EUR1bn macro-financial aid (MFA) operation to Ukraine. On 2 August, the second tranche (an additional EUR500 million), was released. The Council and European Parliament adopted the decision regarding this exceptional MFA on 12 July 2022.
The extraordinary EU and international community have joined forces to provide financial assistance to Ukraine in order to meet its immediate needs after the unprovoked, unjustified aggression of Russia. This is the first part the extraordinary MFA package that could reach EUR9 billion, as announced by the Commission in a communication dated 18 May 2022. It was also endorsed by European Council 23-24 June 2022. This addition complements the EU’s support, which includes a EUR1.2bn MFA emergency loan that was paid out in half the year. The two strands together bring the total MFA support for Ukraine since the start of the war up to EUR2.2bn.
The MFA funds were made available to Ukraine as long-term loans at favourable terms. This assistance will support Ukraine’s macroeconomic stability as well as overall resilience, in the face of Russia’s military aggression. As a sign of solidarity, the EU budget will pay the interest on the loan. Like all other MFA loans before it, the Commission borrows funds from international capital markets and then transfers the proceeds to Ukraine. The loan to Ukraine is secured for 70% of the EU budget value.
In addition to the extraordinary EU support, including humanitarian, development, and defense assistance, and the suspension for one year of import duties on Ukrainian exports, or other solidarity initiatives such as. To address transport bottlenecks, so that exports, mainly of grains, could be assured.
An Economy That Works for People Executive Vice President Valdis Dimbrovskis stated that the EUR1 billion payment was a part of our EUR9bn macro-financial aid package to assist Ukraine with its urgent financial needs. We are also working closely with EU member states and international partners to determine the next steps for rebuilding Ukraine in the long-term. “The EU will provide all the political, financial and humanitarian support necessary to help Ukraine and its people face Russia’s ongoing illegal aggression. This will be for as long as it takes.
Josep Borrell, High Representative of European Union for Foreign Affairs and Security Policy ( pictured), stated that “our support for Ukraine is unwavering.” We will continue to support Ukraine’s people, both financially and militarily, in the face of the challenges and adversities wrought by Russia’s aggression. Ukraine defends its sovereignty and its right to exist with determination, dignity. “The EU stands with Ukraine in these endeavors and will continue doing so.”
Johannes Hahn, Budget and Administration Commissioner said that the quick disbursement by the Commission of the first tranche for the extraordinary MFA loan of EUR1billion shows the EU’s unwavering support for Ukraine and its people. This solidarity is facilitated by the EU budget, which supports these funds up to 70% and covers the interest costs of this loan. Another example is that the EU budget also delivers for our partners during times of crisis.
Economy Commissioner Paolo Gentilon stated that “With this disbursement, the European Commission continues its support to Ukraine in shoring-up its public finances. The EU must continue to stand by the Ukrainian people in the face of Russia’s brutal and unrelenting aggression. The second part of the exceptional macro-financial aid, which was announced in May and approved by the European Council, is being worked on.
In recent years, the EU has provided substantial assistance to Ukraine under its MFA programme. Five MFA programs have provided more than EUR5 billion to Ukraine since 2014. These programmes support the implementation a wide reform agenda, including the fight against corruption and the establishment of an independent judiciary. The Commission also granted an MFA emergency loan in the amount of EUR1.2 billion earlier in the year. Funds were raised in two private placements during the first half 2022. The Commission laid out plans in a Communications for the EU’s immediate response and long-term reconstruction plan. The Board of the EIB (EU bank) approved EUR1.59 trillion in financial assistance. This was supported by guarantees from the EU budget.
The Commission borrows capital markets for the EU to finance the MFA. This is in addition to its other programmes like NextGenerationEU or SURE. The Commission’s funding plan for 2022-2023 includes the possibility of borrowing from Ukraine. More information about the EU’s aid to Ukraine since the beginning of Russia’s war of aggression can be found online .
Macro-financial Assistance (MFA) is part of the EU’s wider engagements with neighboring countries. They are an exceptional EU crisis response tool. These funds are available to EU neighbour countries with severe balance-of payments problems. The EU supports Ukraine with several instruments beyond MFA. These include budget support, humanitarian aid, technical assistance, and blending facilities that support investment.
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