One unprecedented financial support package for Ukraineheight 18 billion euros for 2023, she suggested European Commission. This package will take the form of loans on extremely favorable terms which will be disbursed in regular installments, i.e. 1.5 billion euros per month.
Presenting the EU financial support program for Ukraine, totaling EUR 18 billion for 2023, Commission Vice-President Valdis Dombrovskis and Budget Commissioner Johannes Hahn stressed that the aim is to help the country to ensure macroeconomic stability, to restore Russian-damaged basic infrastructure (energy infrastructure, water systems, transport networks, roads and bridges), continue to pay salaries and pensions, and maintain the operation of basic public services such as hospitals, schools and housing for people who are relocated.
According to the Commission, stable, regular and predictable financial assistance – an average of €1.5 billion per month – will help cover a significant part of Ukraine’s short-term financing needs for 2023. It is noted that, according to the International Monetary Cash desk, Ukraine would need between 3 and 4 billion euros per month in 2023 to maintain its public services. Therefore, the support proposed by the EU should be accompanied by similar efforts by other major donors in order to cover all of Ukraine’s financing needs for 2023.
The financial support of Ukraine will be accompanied, as reported by APE-MPE, by reforms to further strengthen the rule of law, good governance, anti-fraud and anti-corruption measures in Ukraine. Therefore, while taking into account developments on the ground, financial support will be framed in policy terms, with the aim of strengthening Ukraine’s institutions and preparing the ground for a successful reconstruction effort, as well as supporting Ukraine on its European path .
How the economic support package of Ukraine will work
Building on previous Macroeconomic Assistance packages, this Macroeconomic Financial Assistance+ (MFA+) instrument offers high flexibility and very favorable terms for Ukraine, covering the country’s current situation and ensuring rapid action to support the Ukrainian people.
The funds will be provided through highly concessional loans, which will be repaid within a maximum of 35 years, starting in 2033. In a further expression of solidarity, the EU also proposes to cover Ukraine’s interest costs, through additional targeted payments from member states to the EU budget. EU member states and third countries will also be able to add more funds to the instrument, which will be used as grants if they wish. The funds will then be channeled through the EU budget, allowing Ukraine to receive support in a coordinated manner.
The MFA+ instrument will be accompanied by reforms to help Ukraine move forward on its path to EU membership. This means that the Ukrainian government should complement the financial support with sectoral and institutional reforms, including anti-corruption reforms and the judicial system, respect for the rule of law, good governance and the modernization of national and local institutions.
How the EU will finance the support package for Ukraine
To secure the funds for the loans, the Commission proposes to borrow in the capital markets using the diversified financing strategy. This will allow the Commission to use its full portfolio of funding instruments to secure market funding on the most favorable terms when necessary.
To guarantee this loan for Ukraine, the Commission proposes to use the EU budget margin for the period 2021-2027 in a targeted manner for Ukraine. The margin is the difference between the own reimgs ceiling (ie the maximum amount of reimgs the Commission can ask Member States to contribute in a given year) and the funds actually needed to cover the expenditure foreseen by the budget. The margin, which is already used to guarantee lending for financial aid programs to member states, will guarantee bond investors that amounts borrowed from the EU to finance Ukrainian loans will be repaid under any circumstances.
To ensure the smooth delivery of the package, the Commission is putting forward three legislative proposals. These will need approval from the European Parliament and EU member states in the Council before they come into force.
Source: News Beast
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