EU: Ukraine €1 bn macro-financial loan

Strasbourg 07.07.2022 On Thursday, MEPs gave the green light to a €1 billion macro-financial loan to help Ukraine cover its external financing needs that have ballooned due to the war. (Image above: illustration).

Parliament agreed to a Commission proposal to provide Kyiv with an additional loan on highly favourable terms, on top of €1.2 billion disbursed already in March and May 2022. The current amount is the first tranche of upcoming exceptional macro-financial assistance worth €9 billion.

Ukraine’s external financing needs ballooned due to the Russian invasion: besides the tremendous damage to roads, bridges, factories, houses, hospitals and other physical infrastructure, the country has also lost its access to the international financial markets. As a result, Ukraine is short $39 billion (€37.3 billion) to meet its financing needs for 2022, according to the International Monetary Fund.

The loan serves as “swift financial support in a situation of acute funding needs and to ensure the continued functioning of the most critical functions of the Ukrainian state”, the proposal states. It will be disbursed in one instalment conditional on fulfilling various criteria including enhanced transparency and reporting on its use. The EU budget will exceptionally finance the interest costs.

A precondition for granting the assistance should be that Ukraine respects effective democratic mechanisms despite the concentration of power in the executive branch during the war, the proposal states.

The resolution, adopted under the urgent procedure, passed with 522 votes for, 17 against and 25 abstentions.

Macro-financial assistance is an emergency resource, provided on highly favourable terms, for EU neighbourhood countries struggling to pay their bills. The total amount of such favourable loans from the EU to Ukraine since the start of the war will reach €2.2 billion in 2022, and could reach up to €10 billion if the whole exceptional package is agreed upon.

Ukraine corruption index in 2021 indicated 23% public services users paid a bribe in last 12 months, overall Ukraine scores 122 place from 180 countries, where the research took place.

The measure will apply on the day following its publication in the Official Journal of the EU

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