In the framework of the Eastern Partnership Summit, Ukraine and the EU have signed the Memorandum of Understanding and Loan Agreement of the third Macro-Financial Assistance programme worth EUR 1.8 billion to help stabilise the situation in in the country.

On behalf of Ukraine, the documents were signed by Minister of Finance of Ukraine Natalia Yaresko and Governor of the National Bank of Ukraine Valeria Gonatreva.

"The European Union’s support of Ukraine has always been and remains of an utmost importance. – said Valeria Gontareva. – There is no doubt that the funds  obtained within the framework of this Program, which is part of a broader package of financial assistance provided to Ukraine by the international financial institutions and bilateral donors, will contribute to stabilizing Ukraine's external position, balancing the budget and implementing economic reforms. At the same time, it is a strong signal of confidence in Ukraine as an institutional borrower, and a candidate for further integration with the EU".

As a side note, the EU has approved three Macro-Financial Assistance programmes worth a total of EUR 3.41 billion. The installments under the first and second Macro-Financial Assistance programmes have already been disbursed to Ukraine.

The funds under the third package of the Macro-Financial Assistance will be disbursed in three installments (two installments worth EUR 600 million each will be disbursed in 2015 and one installment worth EUR 600 million in 2016), the amounts and conditions attached to the provision of financial assistance are set out in the Memorandum of Understanding.

The first installment will be disbursed to our country in the second half of June 2015 following the ratification by the Verkhovna Rada of Ukraine of the treaty documents and approval by the IMF Executive Board of the first review under the Extended Fund Facility.

“We recognize all obligations undertaken by Ukraine to international investors. They are all closely correlated with the tasks we have set before ourselves. Their fulfillment is a strategic benchmark for Ukraine," underlined Governor of the National Bank of Ukraine Valeria Gontareva.

Under the Memorandum, one of the conditions attached to the disbursement of the second installment, is the adoption by the National Bank of Ukraine of the Regulation on the procedure of identifying individuals and legal entities as bank’s related parties.

On May 12, 2015, the Board of the National Bank of Ukraine passed Resolution No 315 On the Approval of the Regulation on the Procedure of Identifying Banks' Related Parties, which, inter alia, sets out the procedure governing the submission by banks of information on banks' related parties to the regulator and specifies the features that the regulator may use in identifying individuals and legal entities as banks' related parties.

Another condition attached to the disbursement of the third installment in the area of financial sector reforms is the establishment of the Central Credit Registry, which is aimed at improving banks' credit risk assessment and reducing the share of non-performing loans in the mid-term. The National Bank of Ukraine is currently focusing its efforts in this area.

The second and third installments will not be disbursed until after three months following the disbursement of the previous installment and will be subject to approval by the European Commission of the progress made by Ukraine in implementing structural reform measures and conditional on the satisfactory implementation of an IMF programme.

"We highly appreciate the international community's support, and we are grateful to all investors and donors who believe in what we are doing and facilitate the implementation of institutional reforms in Ukraine," added Valeria Gontareva.

For reference

Macro-financial Assistance is an external instrument of the EU under which financial assistance is granted to third countries close to the EU in the form of loans with a maximum maturity of 15 years.  Its objective is to restore a sustainable external financial situation. Such assistance is provided to EU partner countries experiencing acute balance-of-payments difficulties. MFA complements financing provided by the International Monetary Fund.

Macro-financial Assistance is granted on the basis of the Memorandum of Understanding and Loan Agreement between the recipient country and the EU.

The Memorandum of Understanding sets out the terms and conditions attached to the disbursement of each tranche, whereas the Loan Agreement provides the details of the loan arrangement.

In is common practice that the country's central bank acts as an agent of the borrowing country and opens an account in Euros, to which the funds disbursed under the Macro-Financial Assistance programme will be transferred.

The interest rate is established by the European Commission, which enjoys an AAA credit rating, when it raises funds on the international capital markets. These funds will be provided to Ukraine at the same interest rate.