EU initiates new lending program for Ukraine for EUR 1.2 bln

President of the EU Commission Ursula von der Leyen
announced on Jan. 24 the creation of an emergency macro-financial assistance
(MFA) program for Ukraine worth EUR 1.2 bln, “to address its financing needs
due to the conflict”. After the initiative is approved by EU Council and
European Parliament, which von der Leyen expects to happen “as soon as
possible,” Ukraine will be able to receive the first loan tranche under the
program for EUR 0.6 bln. Also, the EU is considering providing Ukraine grants
for EUR 120 mln. On top of that, the EU will work on another, longer-term, MFA
program for Ukraine. “This support will strengthen Ukraine’s state-building and
resilience efforts,” von der Leyen assured. She also stated that the EU “will
continue to invest in the country’s future” via an Investment Plan that “aims
to leverage over EUR 6 bln in investments.”

Since 2014, Ukraine has received EUR 5.01 bln loans
under EU’s five MFA programs. The last program terminated in October 2021 with
provision of EUR 0.6 bln loan to Ukraine.

Alexander Paraschiy: Although
the Ukrainian government does not need immediate financing of budget deficit,
such support from the EU is important backing, especially at a time when
private lenders are scared by news of a potential Russian escalation. Securing
multilateral and bilateral financial support from its western partners is what
Ukraine needs in these times to prove it remains financially stable and solvent
despite the threat. Anyway, we believe a window for raising private
international financing for state and state entities will soon be open for
Ukraine as well.