EU approves EUR 0.5 bln loan tranche for Ukraine

The European Commission announced in a Nov. 30 press
release the disbursement of a EUR 500 mln loan tranche to Ukraine under the
fourth program of Macro-Financial Assistance (MFA IV). With this tranche, total
loans under MFA to Ukraine since 2014 will reach EUR 3.3 bln, which is “the
largest amount of such assistance directed at any non-EU country,” the
commission highlighted. The total amount of financing under the MFA IV program,
as approved in July, is EUR 1.0
bln, which consists of two equal tranches. The second tranche can be disbursed
no earlier than three months after the first one, and no later than 2.5 years
after the program’s start.

The next tranche will be conditional upon Ukraine’s
progress in public financial management, launching the High Anti-Corruption
Court of Ukraine, and the continuation of reforms of the social policy, energy
and banking sectors, the commission said.

In particular, the commission will consider Ukraine’s
progress in 12 tasks, according to the signed memorandum. They include adoption
of a mid-term plan to reform tax and customs administration overall,
simplification of customs clearance, tax evasion enforcement, ensuring a fully
functional verification system of electronic declarations, selection of
candidate judges to the High Anti-Corruption Court, adoption of anti-money
laundering laws, reaching progress in fighting NPLs in state banks and
improving their corporate governance, and reaching progress in reforming the
electricity market, healthcare and social subsidies.

Alexander Paraschiy: Over the
last week, three key lenders to Ukraine – the EU, the Word Bank and the IMF –
declared their intention to provide long-awaited financing for the country by
the year end. Their joint contribution of about USD 3 bln to Ukraine’s gross
reserves this month will significantly improve Ukraine’s debt-servicing
capacity throughout 2019, thereby reducing risks for Ukraine’s currency. The
next tranches from the IMF and the EU are less likely in 2019, but still remain
possible.