EU ambassador confirms Ukraine to get EUR 600 mln soon

EU Delegation to Ukraine Head Hugues Mingarelli expects that Ukraine will receive a second loan tranche for EUR 600 mln under the EU Macro-Financial Assistance (MFA) program in a few weeks, he said in an interview published by the rbc.ua news site on March 13. “A positive result can be expected not in months, but weeks,” he said.

Mingarelli confirmed that just the submission of a draft law to parliament to remove a timber export ban is a sufficient condition for the second tranche. But a third tranche of EUR 600 mln will critically depend on parliament’s approval of the timber export permit, he said. 

Ukraine got the first tranche of EUR 1,800 mln in June 2015 under MFA program, and was expecting to get another two other tranches in 2015-2016, but failed.

Alexander Paraschiy: Based on what Mingarelli said, we can expect the EU will provide its second tranche soon after the IMF issues the USD 1.0 bln fourth tranche under its Extended Funds Facility (EFF) program. This allows us to expect that Ukraine will receive over USD 1.6 bln from the IMF and EU in the coming two-to-three weeks. This should serve as solid psychological backing for the stability of the Ukrainian currency, amid recent central bank warnings that the activist-led trade blockade of the occupied regions threatens the hryvnia’s stability.

The third EU tranche under the MFA, most likely, will be linked not only to a removal of the timber export ban, but it will also be conditional on the IMF’s subsequent tranches. Since these pre-conditions do not look very likely (with populists parliament likely to block at least some of them), the chance for Ukraine to get the third MFA tranche already this year is low, in our view.