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Ukraine receives first €100mn of ‘exceptional crisis-response’ EU aid

Published time: May 20, 2014 13:43
Reuters / Francois Lenoir

Reuters / Francois Lenoir

The European Commission issued Ukraine a €100mn loan, the first tranche of aid part of a larger €1.61bn macroeconomic package to help support economic reform focusing on anti-corruption, energy subsidies, financial sector reform, and trade and taxation.

The next €500 million is expected to follow in the coming weeks.

"The European Union is fully committed to helping Ukraine address its major economic challenges. This first disbursement marks an important step towards turning that commitment into reality. This assistance, which will soon be followed by a further €500 million, provides much-needed support to Ukraine's efforts to cover its external financing needs,” the Vice-President of the European Commission Siim Kallas said in Brussels today.

The macroeconomic aid is complimentary assistance provided by the IMF via loans financed through EU borrowing on capital markets, and then lent on similar conditions to the receiving country, according to the European Commission's statement on their website.

The loans to Ukraine’s National Bank have a 15 year term and will be used to reduce the economy’s vulnerability.

The help arrived within the two months interim Prime Minister Arseniy Yatsenyuk said he expected it would take Ukraine to receive the first money, after signing the cooperation agreement with the International Monetary Fund. The rest of the aid will be made available once the necessary legal procedures in Ukraine have been finalized.

Ukraine’s economy has spun into a free-fall over the past year. The hryvnia has lost 30 percent since January and the country’s foreign currency reserves are nearly empty. In the first three months of 2014, the economy lost 1.1 percent. Public sector debt is out-of-control at 57 percent of GDP.

Ukraine has also received $3.2 billion from the International Monetary Fund, the first tranche of a $17 billion loan.

EU ministers were gathered in Brussels to discuss decentralizing power in Ukraine, which has been a key issue for pro-Russia separatists in eastern Ukraine who feel their political voice isn’t represented in Kiev.

On May 13, Ukrainian officials met with EU commission ministers and received assurances of €1.61 billion in macroeconomic loans for Ukraine to help with the current critical economic circumstances.

The US has also issued $1 billion in loan guarantees to Ukraine through its Agency for International Development (USAID).