EU puts forward new EUR 5bn aid package for Ukraine
Ursula von der Leyen - Photo © European Union 2022
(BRUSSELS) - The European Commission proposed Wednesday a further EUR 5 billion in macro-financial assistance (MFA) loans to Ukraine as the second part of an exceptional MFA package of up to EUR 9 billion.
The Commission disbursed the first €1 billion of this MFA package in early August. The remaining up to €3 billion will be provided as soon as possible, says the EU executive.
"Today, the Commission is coming forward with a proposal for a further €5 billion macro-financial assistance to support Ukraine in addressing its immediate financial needs caused by Russia's brutal invasion," said Commission president Ursula von der Leyen: "Ukraine must win this war: it must regain the freedom and independence it is so courageously fighting for. The EU will continue to do its part to make sure this happens – solidarity will prevail, and peace will come."
The proposal is part of efforts by the EU, with the international community, to help Ukraine to address its soaring financial needs following the unprovoked and unjustified aggression by Russia. It is a key element of the overall short-term liquidity relief measures as announced by the Commission in May 2022 and makes a sizeable contribution to close the outstanding funding gap for the fourth quarter to ensure maintained stability. The proposal will complement the support already provided by the EU, including a €1.2 billion emergency MFA loan paid out in the first half of the year. Taken together, the two strands of the programme would bring the total MFA support to Ukraine since the beginning of the war to €7.2 billion, and could reach up to €10 billion once the full package of exceptional MFA to Ukraine becomes operational this year.
Under the proposal, MFA funds will be made available to Ukraine in the form of long-term loans on favourable terms, to be disbursed in a small number of instalments. In a further expression of solidarity, the EU budget will cover the interest costs and administrative fee payments linked to the loans. As for all previous MFA loans, the Commission will borrow the funds on international capital markets and transfer the proceeds on the same terms to Ukraine.
The loans to Ukraine will be backed by guarantees provided by Member States which will complement the provisioning available from the EU budget. Between the EU budgetary provisions and the Member State guarantees, the loans will be fully secured for 70% of their value.
As soon as the European Parliament and the Council approve the proposal and the corresponding Memorandum of Understanding and Loan Agreement with the Ukrainian authorities are signed, the Commission will swiftly make available the €5billion.
This financial assistance comes in addition to the unprecedented support provided by the EU to date, notably humanitarian and development assistance from the EU budget, and military assistance through the European Peace Facility, the suspension of all import duties on Ukrainian exports for one year or other solidarity initiatives, e.g. to address transport bottlenecks so that exports, in particular of grains, could be ensured.