European Commission confirms no loan this year, possible in 2018

4 December 2017

The European Commission officially confirmed on Dec. 1 that it won't disburse the third EUR 600 mln tranche of its macro-financial assistance (MFA) program this year, citing requirements that have yet to be fulfilled. At the same time, it said it is willing to assess a Ukrainian proposal for a renewed loan program in early 2018. EU officials anticipate Ukraine reinforcing the reform momentum and resisting internal pressures for policy reversals on important reforms, according to a press release posted on the commission's website. The commission also expects the IMF program to remain on track. On Nov. 24, Ukrainian President Poroshenko expressed an interest in a renewed EUR 1.8 bln MFA loan program in 2018.

 

Previously, EU Ambassador to Ukraine Hugh Mingarelli mentioned requirements yet to be fulfilled by Ukraine, including (a) lifting a moratorium on timber exports, (b) launching automatic reviews of electronic asset and income declarations, (c) a law creating a debtor registry and (d) an electronic register for the beneficiary owners of companies.

 

The EU MFA program was launched in July 2015 at a total amount of EUR 1.8 bln. The initial plan foresaw three loan tranches for Ukraine, EUR 600 mln each, to be provided in 2Q15 (upon the program’s launch), 3Q15 and 1Q16. Ukraine was able to receive the second tranche only in 2Q17.

 

Alexander ParaschiyThe Commission is preserving incentives for Ukraine for further reforms, but the press release was replete with dissatisfaction with the current lack of progress. So a new MFA program does not mean that funding will be available shortly. Indeed, it looks like the Commission will be very demanding in assessing Ukraine's new program proposal and will maintain a tough position on completing committed reforms. This press release reassured us in our view that we can expect only one more wire from the EU in 2018 amid the slow reform process undertaken by the Ukrainian government.