EU Commission approves EUR 600 mln MFA tranche for Ukraine
The European Commission decided to disburse a second tranche under the COVID-related Macro Financial Assistance (MFA) for Ukraine in the amount of EUR 600 mln, rbc.ua news site reported on Sept. 15, citing the Commission’s vice-president Valdis Dombrovskis. PM Denys Shmyhal and president Volodymyr Zelensky confirmed this in tweets. Ukraine has implemented all the political conditions for the tranche and progressed in its IMF program, which allowed the Commission to make a positive decision on the second tranche, Dombrovskis told rbc.ua. He added that the payment is likely to be made in October. The day before, Shmyhal revealed his expectation that the tranche would arrive in November.
The COVID-related MFA program for Ukraine was initiated by the EU in June 2020 for a total value of EUR 1.2 bln. The first tranche under the program for EUR 0.6 bln was disbursed in December.
Alexander Paraschiy: The upcoming disbursement of the second tranche is a positive surprise. With this tranche, Ukraine will secure its financial stability and will lower its need to seek domestic financing of the budget deficit. This, however, does not secure a positive result for the IMF’s review under the Stand-by program. Moreover, easy money from the EU may make the Ukrainian government relax its drive to keep its commitments to Western partners thus raising the probability of political events/movement against reforms in the short-term. As before, we estimate the probability of the IMF’s next tranche as below 50% in 2021.