Reforms on hold – tranche cut: how Ukraine lost €1.4 billion in EU aid
25 July 2025 17:58
The fourth tranche of financial assistance to Ukraine under the Ukraine Facility program will be smaller than expected. This was stated by the European Commission spokesman Guillaume Mercier, "Komersant Ukrainian" reports citing Ukrayinska Pravda.
The European Commission had planned to provide €4.5 billion, but following the results of the reforms’ implementation check, it proposes to reduce the payment to €3.05 billion. The reason is that Ukraine has not fulfilled its obligations. Of the 16 structural reforms that had to be implemented for this tranche, three remained unimplemented.
These are, in particular, the following:
- completion of decentralization;
- adoption of the law on the reform of ARMA (Asset Recovery and Management Agency);
- reform of the procedure for selecting judges to the High Anti-Corruption Court (HACC).
According to Mr. Mercier, these are the areas that are considered key to strengthening transparency, integrity and effective functioning of the anti-corruption and judicial systems. He emphasized that the fourth tranche was the largest both in terms of funding and the number of reforms that had to be implemented to receive it.
The EC spokesperson noted that the Ukrainian side had declared the implementation of 13 reforms, and the Commission agreed with this conclusion. However, the failure to implement three reforms does not allow the full amount to be paid. If all obligations were fully met, Kyiv could have received the entire €4.5 billion package.
Despite the reduction of the tranche, the European Commission recognizes Ukraine’s progress and calls for further reforms in these areas. Successful completion of the reforms can ensure full funding of the next tranches under the Ukraine Facility, which provides up to €50 billion for 2024-2027.
What is the Ukraine Facility program?
The Ukraine Facility is a four-year financial assistance program for Ukraine from the European Union, totaling up to €50 billion for the period 2024-2027. It was officially approved in February 2024 as part of the EU’s long-term budget. The goal of the program is to support Ukraine’s macro-financial stability, stimulate reforms, and support the country’s post-war recovery and modernization.
The program has three main components:
- budget support
- investment incentives,
- and technical assistance.
Most of the funds come in the form of grants and concessional loans disbursed in tranches. In order to receive each subsequent tranche, Kyiv must demonstrate the implementation of structural reforms agreed with the European Commission as part of the Recovery Plan.
The priorities include reforms in the areas of anti-corruption, justice, public administration, energy, and improving the business climate. The Ukraine Facility also aims to support Ukraine’s integration into the European single market.
The program is considered a key mechanism of the EU’s long-term support for Ukraine in the context of Russian aggression and the strategic goal of EU membership.
Read also: Ukraine and the EU signed a loan agreement for the Ukraine Facility: what does it provide for?
Law on ARMA reform: what does it say?
The law provides for a comprehensive reform of the National Asset Recovery and Management Agency (ARMA) to increase transparency, efficiency and institutional capacity of the agency. The document introduces new qualification requirements for the Head of ARMA and members of the management, as well as open competitions with the participation of international experts to ensure the integrity of the selection.
The law establishes a differential model of asset management: “simple” assets (cash, single property) will be put up for sale through a Prozorro auction, while “complex” assets will be handled by a special commission with the participation of the Business Ombudsman, the National Securities Commission, the Ministry of Economy and the Ministry of Justice.
It also introduces the mechanism of the “manager of last resort” for assets that could not be sold through standard procedures.
The law strengthens control standards:
- mandatory quarterly reports by ARMA,
- detailed public information in the asset register,
- monthly documentary and quarterly on-site inspections.
At the same time, the threshold for the value of assets to be transferred to ARMA is increased from 200 to 500 subsistence minimums, and the institution of a guarantee payment for the preservation of the asset during the investigation is introduced.
The reform also introduces an automated system for determining receivers to reduce the human factor, a ban on competitors’ participation in the appointment, and clear regulation of the grounds for termination of the contract in case of a conflict of interest.
Reform of the selection procedure for judges of the High Anti-Corruption Court (HACC)
The reform is focused on ensuring maximum transparency, integrity and independence of the selection process. The key element of the innovation is the extension of the powers of the Public Council of International Experts (PCIE) for another 18 months. This body will include foreign experts who will have a decisive vote in the selection of candidates for HACC judges. This ensures that the competition process remains open to international scrutiny and is accountable to both Ukrainian and Western partners.
According to the updated regulations, the PCIE will continue to support the competition to fill vacant seats in the HACC starting from March 2023. This postponement ensures a fair selection process for the appointment of new judges, even in the face of delays in the formation of the High Qualification Commission of Judges (HQCJ).
Previously, the selection procedure was within the scope of the HQCJ’s authority. However, the body was often criticized for lack of transparency and influence of the judiciary.
The reform provides for a clear division of functions: PCIE hears the candidates’ dossiers, has access to the materials and influences the rating, while the HQCJ makes decisions in accordance with the council’s recommendations. If the PCIE does not approve a candidate, the HQCJ can appoint him or her with only two-thirds of the votes with a minimum of nine supporting votes.
Thus, the reform strengthens control over the selection of HACC judges by involving international experts with a casting vote. This is important not only for maintaining international confidence in Ukraine’s anti-corruption courts, but also for meeting the EU and IMF requirements for judicial independence and anti-corruption.
Decentralization reform in Ukraine
This is one of the key structural reforms that began in 2014 and aims to transfer powers, resources and responsibilities from the central government to local governments. It should make governance more efficient, bring services closer to citizens, and provide communities with real autonomy in decision-making.
Key provisions of the reform
1. Creation of amalgamated territorial communities (ATCs). Villages, towns, and cities were amalgamated into communities to use resources more efficiently, share infrastructure and an administrative system. Each community was empowered to independently manage its budget, education, healthcare, and public utilities.
2. Financial decentralization. Communities received the right to directly receive a portion of taxes (in particular, 60% of personal income tax), which allowed them to form budgets, build schools, roads, and clinics without applying to Kyiv.
3. New administrative and territorial structure. In 2020, Ukraine reduced the number of rayons (from more than 490 to 136) and approved a map of new united territorial communities, completing the first stage of the reform.
4. Transfer of powers to the community level. Local councils gained more influence over education, healthcare, land, urban planning, culture, and social services.
Why this reform is important:
- increases the accountability and transparency of the authorities;
- reduces corruption risks due to less centralization;
- provides communities with resources for infrastructure development
- creates the basis for sustainable regional development and is a prerequisite for European integration.
As of 2025, the decentralization reform is still ongoing, in particular in terms of constitutional amendments that should enshrine the new system of local self-government on a permanent basis.
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