EC pays out 3BN euro first instalment of assistance package for Ukraine

The European Commission (EC) paid out on January 17 a first instalment of three billion euro of the up to 18 billion euro Macro-financial Assistance+ (MFA+) package for Ukraine, the EC said.

This follows the swift adoption and entry into force of the MFA+ Regulation mid-December 2022, less than two months following the request from the European Council meeting on October 20-21 2022.

“With the stable, regular and predictable financial support of up to 18 billion euro for 2023 under this instrument, Ukraine will be able to keep on paying wages and pensions and maintain essential public services running, such as hospitals, schools, and housing for relocated people,” the EC said.

“It will also allow Ukraine to ensure macroeconomic stability and restore critical infrastructure destroyed by Russia in its war of aggression, such as energy infrastructure, water systems, transport networks, roads and bridges,” the Commission said.

In comparison to standard MFA operations, and to reflect the current circumstances in Ukraine, this MFA+ instrument offers Ukraine increased flexibility and more favourable borrowing terms, the statement said.

Ukraine will need to repay the highly concessional loans over up to 35 years, starting from 2033.

In a further expression of solidarity, the EU has also offered to cover the interest rate costs of Ukraine, supported where needed through additional payments by EU countries into the EU budget, the EC said.

EU member states and third countries will moreover be able to contribute further funds into the instrument, to be used as grants, should they wish to do so.

The funds will then be channelled through the EU budget, allowing Ukraine to receive the support in a coordinated manner.

The funding will help Ukraine address its pressing short-term funding needs and is accompanied by reforms as well as reporting requirements to ensure the transparent and efficient use of the funds.

These are laid out in a Memorandum of Understanding between Ukraine and the EC, which entered into force on January 16 2023.

“The agreed policy conditions are geared towards strengthening Ukraine’s institutions and preparing the ground for a successful reconstruction effort, as well as supporting Ukraine on its European path,” the EC said.

The 20 targeted policy conditions, considered to be achievable by Ukraine and the EC by the end of 2023, concern four policy areas: macro-financial stability, structural reforms and good governance, rule of law and anti-coruption, and energy.

Future payments to Ukraine under the MFA+ instrument of €1.5 billion per month, will continue as of March and will be conditional on satisfactory progress towards implementing the agreed conditionality, as well as continuous compliance with the reporting requirements.

To secure the funds for the loans, the EC is borrowing on capital markets under its unified funding approach.

(Photo: EC Audiovisual Service)

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