PURPOSE: to provide additional macro-financial
assistance to Ukraine to support economic stabilisation and
structural reforms.
PROPOSED ACT: Decision of the European Parliament and
of the Council.
ROLE OF THE EUROPEAN PARLIAMENT: the European
Parliament decides in accordance with the ordinary legislative
procedure and on an equal footing with the Council.
BACKGROUND: relations between the European Union and
Ukraine continue to develop within the framework of the European
Neighbourhood Policy and the Eastern Partnership. An Association
Agreement between the Union and Ukraine, including a Deep and
Comprehensive Free Trade Area (DCFTA), entered into force on 1
September 2017.
Since spring 2014, Ukraine has embarked on an
ambitious reform programme aiming to stabilise its economy and
improve the livelihoods of its citizens.
In addition to its political support, the Union
pledged over EUR 11 billion financial package in March 2014 to
support economic stabilisation and reform implementation in
Ukraine, including 1.6 billion of macro-financial assistance
pursuant to Council
Decision 2002/639/EC, Decision
No 646/2010/EU of the European Parliament and of the Council
and pursuant to Council Decision 2014/215/EU.
In view of Ukraine's substantial external financing
needs, an additional EUR 1.8 billion of macro-financial assistance
(MFA) was made available to the country in April 2015 pursuant to
Decision
(EU) 2015/601 of the European Parliament and of the
Council.
Since May 2014, Ukraine has received EUR 2.81 billion
of macro-financial assistance from the Union, including EUR 1.2 billion out of the EUR 1.8 billion
available under Decision (EU) 2015/601.
Ukraine fulfilled 17 of the 21 policy commitments
attached to the third tranche of EUR 600 million that could
have been made available to Ukraine under the third MFA operation.
Although four measures were not implemented by the time the
availability period of the assistance expired in January 2018.
Under these circumstances, the Commission was not in a position
to disburse the last tranche under the third MFA
operation.
Given that a residual external financing gap remains
in Ukraines balance of payments over and above the resources
provided by the IMF and other multilateral institutions, the Union
macro-financial assistance to be provided to Ukraine is, under the
current exceptional circumstances, considered to be an appropriate
response to Ukraines request for support to its economic
stabilisation, in conjunction with the IMF programme.
The Unions macro-financial assistance would
support the economic stabilisation and the structural reform agenda
of Ukraine, supplementing resources made available under the
IMFs financial arrangement.
CONTENT: under the proposed Decision, the European
Union shall make MFA available to Ukraine for a total amount of
up to EUR 1 billion, provided in the form of medium- to long-term
loans.
The objective of the proposed AMF is to:
- help Ukraine cover part of its additional external
financing needs in 2018-2019,
reducing the economys short-term balance-of-payment and
fiscal vulnerabilities;
- provide incentives to step up Ukraine's reform
efforts by agreeing with the
Ukrainian authorities a Memorandum of Understanding setting out an
appropriate package of measures supporting economic adjustment and
structural reforms.
The assistance is planned to be disbursed in two
loan instalments. Provided the policy measures attached to each
tranche have been implemented in a timely manner, the first
instalment is expected to be disbursed in the second half of 2018,
while the second instalment could be released in the first half of
2019.
All disbursements under the proposed programme,
including the first, would be conditional on the implementation of
reform measures designed to address vulnerabilities identified in
the Ukrainian economy. These reforms, established in a Memorandum
of Understanding, will have to take into account the measures of
the previous MFA operation that have not yet been implemented,
namely the establishment of a system for verifying asset
declarations of public officials and a verification of data to be
provided by companies on their beneficial owners. The issue wood
export ban shall also be examined.
The MFA may only be completed if major reforms in the
fight against corruption and governance are well
implemented.
In addition, the Memorandum for the new programme will
also include other measures to be implemented by Ukraine in order
to receive the first and second disbursement. These will comprise
actions in the area of public finance management.
BUDGETARY IMPLICATION: the planned assistance would be
provided in the form of loans and should be financed through
borrowing operations that the Commission will conduct on behalf of
the EU. The budgetary costs of the assistance will correspond to
the provisioning, at a rate of 9%, of the amounts disbursed into
the guarantee fund for external lending of the EU, from budget
line 01 03 06 (Provisioning of the Guarantee
Fund).
Assuming that the first loan disbursements will be
made in 2018 for a total amount of EUR 500 million and the second
loan disbursement in 2019 for the amount of EUR 500 million, and
according to the rules governing the guarantee fund mechanism, the
provisioning will take place in the budgets for 2020 (EUR 45
million) and 2021 (EUR 45 million).
The total impact on expenditure is estimated at
EUR 90.997 million for the period 2017-2021.