The European Commission, on behalf of the EU,today disbursed €500 million to Ukraine. This is the second and final loan tranche of the EU’s €1 billion Macro-Financial Assistance (MFA II) programme for Ukraineapproved earlier this year.
This disbursement adds to the €860 million provided so far under the two ongoing MFA programmes for Ukraine. Following today’s disbursement, €250 million remains available under the earlierMFA programme (MFA I).
The objective of the MFA programmes is to support Ukraine financially while encouraging important structural reforms aimed at improving governance, delivering sustainable economic growth and supporting legislative harmonisation with the EU. Specifically, the MFA supports reforms in the areas of public finance management and anti-corruption, trade and taxation, the energy sector and the financial sector.
Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici said: “Europe is delivering on its commitment of solidarity to Ukraine. We are providing essential financial support at a time of extraordinary economic and social challenges for the Ukrainian people. In turn, it is vital the country maintain the momentum of reform so as to create the conditions for sustainable prosperity for all Ukrainians.“
The funding for today’s disbursement was raised by the European Commission on financial markets on 26 November, by increasing an already existing 15-year-bond. For the EU, this tap marked a new historical record-lowyieldof 1.363%. The funds have been on-lent to Ukraine on effectively the same terms, offering a long maturity at a very attractive interest rate.
Financial assistance to Ukraine
The current EU MFA loan to Ukraine amounts to €1.61 billion. Prior to today’s disbursement, three disbursements under this instrument were made earlier this year: €100 million on 20 May, €500 million on 17 June and €260 million on 12 November. The final disbursement of €250 million is expected to be made by spring 2015, provided that Ukraine shows satisfactory progress with the accompanying reforms. The assistance is part of a wider package of support for Ukraine announced by the European Commission on 5 March and endorsed by EU leaders at the European Council on 6 March 2014.
MFA is an exceptional EU crisis-response instrument available to the EU’s neighbouring partner countries experiencing severe balance of payments problems. It is complementary to the assistance provided by the International Monetary Fund (IMF) and other donors in the context of the stabilisation and reform programme launched by the beneficiary country.
The EU as a borrower
The EU borrows on the financial markets for on-lending to sovereign borrowers. Since January 2011, the EU has raised in total €49.36 billion from the bond market, used mainly for the European Financial Stability Mechanism or EFSM (€46.8 billion for Ireland and Portugal, all requested loans have been disbursed) and the remainder for Balance of Payments and Macro-Financial Assistance loans.
In 2015, the EU intends to borrow up to €5.7bn (MFA loans and potential refinancing of the lengthening of maturities under EFSM).
The EU is rated AAA/Aaa/AA+/AAA by the major rating agencies (Fitch, Moody’s, Standard & Poor’s and DBRS), all rating outlooks are stable. The DBRS rating is unsolicited.
The EU funds its loans by issuing debt instruments in the capital markets. Funds raised are lent to beneficiary countries under almost exactly the same terms, i.e. with the same coupon, maturity and for the same amount.
Issuances by the EU are carried out by the European Commission’s financial operations department located in Luxembourg.
Information on MFA operations, including annual reports:
EU investor relations website:
European Commission support for Ukraine: