EU allocates EUR 600 mln to Ukraine

The European Commission announced on July 22 it has allocated EUR 600 mln to Ukraine as the first tranche of the third macro-financial assistance (MFA) loan agreement, which amounts to a total of EUR 1.8 bln in medium-term loans.

The newest tranche comes after EUR 1.6 bln has already been provided by the EU since the beginning of the crisis in Ukraine, said Pierre Moscovici, the European Commissioner for economy and financial affairs, taxation and customs. “In addition, the commission envisages disbursing another EUR 1.2 bln in the coming months subject to successful implementation of the economic and structural reforms agreed between the EU and Ukraine,” he said in a statement posted on the commission’s Facebook page. 

With this program, the EU is helping to cover the urgent financing needs faced by Ukraine while supporting the country’s economic stabilization, the statement said. In addition, the EU’s MFA package will assist Ukrainian authorities in implementing important reforms in the areas of public finance management, governance and transparency, the energy sector, social safety nets, the business environment and the financial sector.

Alexander Paraschiy: The money from the EU is solid support to balance the capital accounts of Ukraine. According to the IMF plan, Ukraine should receive USD 1.8 bln from the EU in 2015. In April, Ukraine received a EUR 250 mln disbursement, which closed the second MFA program, and now we have an extra EUR 600 mln under the third MFA program. The fact that money from the EU arrived prior to the IMF Executive Board’s decision on a second tranche is a positive signal. This disbursement means the European Commission does not expect any surprises from the IMF and is positive about further cooperation. 

In addition to the EU support (and IMF loans), Ukraine is slated to draw an extra USD 1.0 bln from a Eurobond placement in 2H15 (USD 1 bln in Eurobonds were placed in May under U.S. guarantees) and more funding from the World Bank and other partners (up to USD 2.5 bln for the whole year). The scheduled financial injections should guarantee gross international reserves increasing to USD 11.5 bln by the year end (ignoring potential debt operations).