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Ukraine to Receive EUR 1 Billion in EU Macro-Financial Assistance

14 September 2018

Press Release

 

Today, NBU Governor Yakiv Smolii, acting Finance Minister Oksana Markarova and Valdis Dombrovskis, the European Commission’s Vice-President responsible for the euro and social dialogue, who is also in charge of financial stability, financial services and the Capital Markets Union, signed a Memorandum of Understanding and a Loan Agreement for the fourth EU macro-financial assistance program. This official ceremony was attended by Ukraine’ President Petro Poroshenko, Prime Minister Volodymyr Groisman and Foreign Minister Pavlo Klimkin.

 

The fourth macro-financial assistance program envisages EUR 1 billion in macro-financial assistance for Ukraine. The money will be received in two tranches of EUR 500 million each, and will be used to replenish international reserves.

 

“The European Union’s support to Ukraine has always been and remains extremely important. And especially today, when the world markets are not favorable to emerging economies,” said the NBU Governor. “Today's signing sends a powerful positive signal to international investors. It shows that the world community and first of all the European Union believe in Ukraine as an institutional borrower and in consistency in its course of performing reforms.”

 

The governor said that cooperation with international partners was especially important for promoting Ukraine’s economic and financial stability.

 

The EU macro-financial assistance to Ukraine will provide access to long and cheap financing. However, this is not just about money. This is the key to the structural reforms’ implementation in significant areas of state policy. The Ukrainian economy will not be on the track for long-term sustainable growth without them,” said Yakiv Smolii.

 

Background:

 

Macro-financial assistance, which is being extended to a country for a term of up to 15 years, is an exceptional EU financial instrument intended to stabilize the country’s financial and economic system. This instrument is available to EU neighbor countries experiencing balance of payments problems and is an addition to the aid that is provided to the country under its program with the IMF.

 

The terms and conditions of the macro-financial assistance are agreed between the receiving country and the EU in the Memorandum of Understanding and in the Loan Agreement between the receiving country and the EU.

The Memorandum of Understanding stipulates the preconditions the country has to fulfill to qualify for the disbursement of funds under each tranche of the aid, while the Loan Agreement outlines the technical details of each disbursement.

 

As a rule, the country’s central bank acts as an agent of the borrower country and opens a euro account into which the EU disburses the relevant macro-financial assistance tranches.

 

The interest rate is set when the European Commission, which has the highest credit rating (AAA), enters the external debt market to get funds to be transferred to Ukraine at the same rate.

Note that in 2014–2017, the EU and Ukraine implemented three macro-financial assistance programs. In total, Ukraine received EUR 2.81 billion:

 

      EUR 1.36 billion in 2014

 

      EUR 850 million in 2015, and

 

      EUR 600 million in 2017.

 


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Last modification   14.09.2018