European Commission has disbursed the first instalment of € 3 billion of the € 18 billion MFA+ package to Ukraine
The European Commission has disbursed the first instalment of € 3 billion of the upto € 18 billion Macro-Financial Assistance+ (MFA+) package for Ukraine to help the country keep the public services running.
The funds will allow Ukraine to keep on paying wages, pensions and maintain essential public services running such as hospitals, schools and housing for relocated people. It will also allow Ukraine to ensure macroeconomic stability and restore critical infrastructure destroyed by Russia’s invasion such as energy infrastructure, water systems, transport networks, roads and bridges.
In comparison to standard MFA operations, the MFA+ instrument offers Ukraine increased flexibility and more favourable borrowing terms. Ukraine will need to repay the highly concessional loans over upto 35 years, starting from 2033. In a further expression of solidarity, the European Union (E.U.) has also offered to cover the interest rate costs of Ukraine, supported where needed through additional payments by Member States into the E.U. budget.
The Member States and third countries will moreover be able to contribute further funds into the instrument, which will be used as grants. The funds will then be channelled through the E.U. budget, allowing Ukraine to receive the support in a coordinated manner.
Taking it to twitter, the President of the European Commission – Ursula von der Leyen tweeted, “Helping Ukraine meet its financing needs to face the Russian aggression is both crucial and urgent. The Commission is acting with utmost speed and determination: Tomorrow, we will already disburse the first 3 billion € of the 18 bn macro-financial support agreed in December.”
The funding will help Ukraine address its pressing short-term funding needs and is accompanied by reforms as well as reporting requirements to ensure the transparent and efficient use of the funds. These are laid out in a Memorandum of Understanding signed between Ukraine and the European Commission, which entered into force on January 16, 2023.
The agreed policy conditions are aimed at strengthening Ukraine’s institutions and preparing the ground for a successful reconstruction effort, as well as supporting Ukraine on its European path. The 20 targeted policy conditions focus on 4 aspects which include macro-financial stability, structural reforms and good governance, rule of law and anti-corruption, and energy.
Going ahead, Ukraine will get € 1.5 billion per month under MFA+ instrument from March 2023 onwards provided Ukraine demonstrates satisfactory progress towards implementing the agreed conditionality, as well as continuous compliance with the reporting requirements.
It is to be noted that E.U., Member States and European financial institutions have so far pledged upto € 49 billion to Ukraine since the Russian invasion. Besides, the Member States have shown unprecedented solidarity by welcoming millions of people fleeing the war in Ukraine. To support these efforts, the E.U. has activated the Temporary Protection Directive, granting access to jobs, housing, education and healthcare across the E.U. to over 4 million people.
