EU to provide EUR 600 mln loan to Ukraine soon

Ukraine will receive the next EUR 600 mln  macro-financial loan from the EU in the coming weeks, European Commission President Jean-Claude Juncker said on Friday, Feb 10. Juncker spoke after a meeting in Brussels with Ukrainian Prime Minister Volodymyr Groysman, according to Interfax-Ukraine news agency.

Previously, the disbursement had been stalled due to Ukraine’s ban on timber exports. However, Mr. Juncker said the European Commission is pleased with the draft bill the Cabinet developed for lifting the ban on wood exports.

“Over the last two or three years, Ukraine has been realizing reforms of a greater magnitude than those of the past 20 years,” Juncker said. “Ukrainians have the right to see something in return for the reform efforts.”

Ukraine received a first installment of macro-financial support (EUR 600 mln) in July 2015 out of a total program value (third macro-financial assistance program) of EUR 1.8 bln. The Ukrainian authorities anticipated receiving the remaining EUR 1.2 bln from this program in 2016, but received nothing last year.

Alexander Paraschiy: This is an apparent softening of the EU position.  Previously, the European Commission demanded that the timber exports ban be lifted prior to any further funding. Now they are happy with a mere draft law the Cabinet developed. We do not have any information as to why this change has happened. The main suspect is the obvious progress in IMF negotiations after the Privatbank nationalization.

A EUR 600 mln wire as well as at least one tranche from the IMF in 2017 is in line with our expectations. These transfers should bolster gross international reserves up to USD 19.5 bln (4.3 months of imports) by the end of 2017.