Today, in Latvia's capital city Riga, Ukraine and the European Union signed the Memorandum of Understanding and the Loan Agreement related to the third Macro-Financial Assistance (MFA) package from the EU totaling €1.8 billion. The documents were signed on behalf of Ukraine by the Minister of Finance of Ukraine Natalie Jaresko and the Governor of the National Bank of Ukraine Valeriya Gontaryeva. Vice-President of the European Commission Valdis Dombrovskis signed on behalf of the European Union.
The new MFA package will be provided as part of a broader package of financial support for Ukraine from its bilateral and multilateral partners. The aim of the EU financial package is to help Ukraine stabilize its financial system, improve its balance of payments, and implement further reforms.
It is the third Macro-Financial Assistance package provided to Ukraine by the European Union. The EU has already provided financing for a total amount of €1.61 billion in two previous MFA programs. Together with the new program, the volume of financing on behalf of the EU will be equal to €3.41 billion. This is the largest volume of financial support for a non-EU country.
“On behalf of the Government of Ukraine and the Ukrainian people, I would like to express my gratitude to the European Union for its crucial support. This Macro-Financial Assistance package is a testament to the EU’s belief that Ukraine can steer through this challenging period and progress along its path of reform and transformation,” -Natalie Jaresko, Minister of Finance of Ukraine
She underlined that the Government of Ukraine is fully committed to working side by side with European partners.
Ukraine will receive the first tranche of the third Macro-Financial Assistance program, worth €600 million, in the second half of June 2015, after the Memorandum and Loan Agreement are ratified by the Verknovna Rada of Ukraine and the IMF Executive Board approves the second tranche of the Extended Fund Facility Program.
Key facts about Macro-Financial Assistance (MFA):
· The third Macro-Financial Assistance program of the EU provides up to €1,8 billion in the form of a medium-term loans.
· The MFA is provided to the EU partner countries that experience serious balance of payment difficulties.
· The EU Macro-Financial Assistance is complementary to the Program of Cooperation between Ukraine and International Monetary Fund Extended Fund Facility.
· The MFA is provided due to the successful implementation by Ukraine of the current Extended Fund Facility Program with the International Monetary Fund.
· The Memorandum of Understanding defines preconditions for funds allocation of each tranche of assistance and the Loan Agreement defines technical particularities of loan provision.
· The terms of interest of the loan will be determined when the European Commission, which has the highest credit rating (AAA), borrows money on the financial markets. This will then be lent at the same rate of interest to Ukraine.