EU Supports Ukraine With Substantial Financial Aid
The second tranche of the EU macro-financial assistance to Ukraine has just been disbursed. The total of €600 million is intended to help cover the acute financing gaps in Ukraine, which is suffering severely from the consequences of the Russian war of aggression. The assistance is intended to improve Ukraine's macroeconomic stability and help keep state agencies functioning during this critical period.
The EU supports Ukraine to keep the economy going and to provide humanitarian aid. / Picture: © Lukasz Kobus/European Union, 2022
Ukraine urgently needs help from the European Community after the provoked invasion by the Russian Federation. Now the European Commission, on behalf of the EU, decided on a disbursement worth €600 million, which will serve as macro-financial assistance to Ukraine.
Following the unwarranted Russian invasion, Ukraine is facing exceptional humanitarian and defence burdens, and the EU's emergency assistance should enable the country to cover these acute funding gaps.
The first tranche of €600 million from this emergency macro-financial assistance package was disbursed in two instalments on 11 and 18 March respectively.
The financial assistance is disbursed in the form of long-term loans, which are made available on particularly favourable terms. The aim is to close the financing gap of the war-torn country, which is estimated by the international financial institutions at around USD 15 billion for the second quarter of 2022.
The macro-financial assistance (MFA) improves Ukraine's macroeconomic stability and helps keep state agencies functioning during this critical period. The payment is a concrete expression of the EU's unwavering support for Ukraine.
The disbursement follows an assessment of the authorities' progress in implementing the structural policies agreed in the Memorandum of Understanding. Overall, the Commission concludes that the authorities have taken measures to implement the agreed conditionality. However, the current war situation is a form of force majeure that prevents the effective completion of the structural actions.
As an exceptional response to Ukraine's acute financing needs, and as the conditionality cannot be fulfilled at this stage due to force majeure, the Commission has decided to disburse the second tranche immediately.
President Ursula von der Leyen commented on the second disbursement with: "In these extremely difficult times, the EU stands steadfastly by Ukraine and the brave Ukrainian people. Today we have disbursed €600 million in emergency macro-financial assistance to address Ukraine's acute financing needs, ensuring that basic services in the country continue to function and that basic daily needs are met. Today's disbursement is the final tranche of the €1.2 billion financial assistance package I announced at the end of January. In the plans presented on Wednesday, we made it clear that the EU will continue to support Ukraine financially in the short term and also accompany it in the reconstruction process in the long term. Ukraine will get back on its feet - as a democratic and prosperous country."
Background
Macro-financial assistance (MFA) is part of the EU's wider engagement with neighbouring countries and is the EU's crisis management instrument for exceptional situations. It can be provided to neighbouring countries of the EU facing severe balance of payments difficulties.
Since the beginning of the Russian invasion, the EU has significantly increased its support, mobilising around €4.1 billion in macro-financial assistance, budget support, emergency assistance, crisis response and humanitarian aid for Ukraine's economic, social and financial crisis resilience.
A joint international effort is needed to provide short-term financial support to Ukraine to maintain basic services, meet humanitarian needs and repair key destroyed infrastructure.