Ukraine Facility: EU disburses €4.5bn tranche to Ukraine
20 March 2024 17:01
Prime Minister Denys Shmyhal has announced that Ukraine has received €4.5bn in transitional funding under the Ukraine Facility, Komersant ukrainskyi 
reports
The European Commission has transferred the first tranche of macro-financial assistance to Ukraine under the Ukraine Facility programme.
Shmyhal expressed his gratitude to the European Union and European Commission President Ursula von der Leyen.
“We have good news after fruitful discussions in Brussels: today Ukraine has received EUR 4.5 billion in transitional funding under the Ukraine Facility. I am grateful to the EU and European Commission President Ursula von der Leyen for their invaluable support. It strengthens our economic and financial stability,”
– he said.
It should be noted that the Ukraine Facility programme provides for a €6 billion transitional financing mechanism until the final launch of the programme.
Yulia Svyrydenko, First Vice Prime Minister and Minister of Economy of Ukraine, said that the funds Ukraine has now received from the EU will be used to cover the current needs of the state budget and help ensure macroeconomic stability.
According to her, Ukraine will be able to receive the second tranche of EUR 1.5 billion in April 2024 after the implementation of five indicators required for this.
“We are one step away from the start of the Ukraine Facility programme. This week, the Government approved the Ukrainian Plan for the implementation of this programme and now we are waiting for its evaluation by the European Commission and approval by the committee of EU member states. After that, the Ukraine Facility programme will finally enter into force. Its implementation will help to significantly strengthen the sustainability of the national economy, improve the business climate, increase the level of investment inflows and GDP growth,”
– said Yulia Svyrydenko.
During a meeting in Brussels with the President of the European Commission Ursula von der Leyen, Shmyhal handed over the plan for the Ukraine Facility approved by the Cabinet of Ministers.
“This is an important step for the implementation of reforms and financial stability on Ukraine’s path to the EU. We are looking forward to the approval of the Plan and the full launch of the Ukraine Facility programme, worth €50 billion for 4 years,”
– he said in a message on Telegram.
At a joint briefing with the head of the Ukrainian government in Brussels, European Commission President Ursula von der Leyen said she was confident of a positive assessment of the Ukraine Facility plan, Ukrinform reports.
According to her, the relevant services of the European Commission will carefully evaluate the government’s Ukraine Facility plan, which is very important for Ukraine’s further cooperation with the European Union.
According to the Ukraine Facility regulations, Ukraine can receive up to EUR 1.5 billion per month under the transitional financing until the final approval of the Ukraine Facility Plan. The transitional financing was launched on 31 December 2023. This allowed Ukraine to attract €4.5 billion in March 2024 in total for the first three months of the year. Ukraine will be able to receive the next €1.5 billion in April after meeting the indicators for the transitional funding.
What does the Ukraine Facility plan envisage?
TheUkraine Facility Plan envisages the implementation of structural reforms in the public sector, a number of economic reforms aimed at developing the business climate and entrepreneurship, as well as steps to develop priority sectors that can ensure rapid economic growth. The implementation of the Plan will contribute to Ukraine’s European integration and further sustainable economic development.
TheUkraine Facility Plan includes more than 150 indicators in 69 reform areas to be implemented by 2027. The plan was developed in full synchronisation with Ukraine’s key international partners.
The Ukraine Facility Plan also includes 16 investment indicators that are part of the overall list of changes. To meet them, it is necessary to continue and strengthen programmes for infrastructure development, demining, renewable energy, support for small and medium-sized enterprises, etc.
Funding under the Ukraine Facility programme is directly dependent on the fulfilment of the indicators set out in the Ukraine Facility Plan. In 2024, more than 36 indicators are planned to be implemented in the areas of improving public financial management, fighting corruption, managing state property, developing human capital, improving the business environment and developing priority sectors.
The last instalment under the programme is expected to be disbursed in 2028 based on the performance of the indicators for the fourth quarter of 2027.
A €6 billion transitional financing mechanism is envisaged for the period until the final launch of the Ukraine Facility programme.
As part of the transitional financing arrangements, Ukraine is implementing 5 indicators in the areas of public financial management, anti-corruption, business environment development and land market functioning. Three of them have already been implemented, and two more steps required to receive transitional funding are under development.
When will Ukraine receive €50 billion?
The EU’s €50 billion support programme for Ukraine will run from 2024 to 2027 and will have three components:
- The first component is direct support to the state budget – €38.27 billion, including €33 billion in loans and €5.27 billion in grants;
- The second component is a special investment instrument to cover risks in priority sectors – EUR 6.97 billion;
- The third component is technical support for the implementation of reforms, as well as interest coverage on loans, including those received earlier – EUR 4.76 billion.
The first instalment under the Transitional Funding Arrangements in the amount of EUR 4.5 billion is expected to be received in March 2024. Ukraine will be able to receive the rest of this amount – EUR 1.5 billion – in April 2024 after the European Commission assesses the fulfilment of the indicators.
What you need to know about the Ukraine Facility
The Ukraine Facility is a €50 billion financing mechanism for Ukraine for the period 2024-2027. As previously reported by the EU, this programme consists of €17 billion in grants and €33 billion in loans. The mechanism provides not only for financing budgetary areas in Ukraine during the war, but also for programmes aimed at implementing the reforms on which Ukraine’s accession to the EU depends.
The resolution emphasises that EU support should be directed in three areas.
The first is financial support for Ukraine to implement reforms and investments, as well as to maintain the country’s macro-financial stability, as envisaged in the Ukraine Plan to be developed by the Ukrainian government.
The second is Ukraine’s investment framework to mobilise investment and increase access to finance.
The third is assistance on the path to European integration to mobilise technical expertise and build capacity.
In early February, all 27 EU leaders agreed on this programme, although the EU had to compromise to persuade Hungary to do so.
It should be noted that decisions at EU leaders’ summits are made unanimously. This has traditionally been used by Hungary, which has blocked almost all of Ukraine’s European aspirations. It also blocked the decision to allocate €50 billion to Ukraine back in December last year. It got to the point where the press reported that the EU was ready to “shake up” Hungary’s economy to make the Hungarian authorities more compliant.
After that, Hungarian politicians may have become more willing to engage in dialogue, but European officials still had to make concessions to Orban. There were two such concessions.
First, EU leaders agreed on the following rule:
“The European Council will hold an annual debate on the implementation of the mechanism to provide guidance. If necessary, the mechanism may be reviewed after two years in the context of the European budget process.”
This provision will allow Hungary to continue to exert pressure, demand the abolition of the mechanism and blackmail Brussels again. However, according to media reports, everything is written in such a way that Hungary will no longer have a veto on this issue.
The second innovation is also a major concession for Hungary. Brussels has withdrawn a provision that was originally created “for Hungary”. It was a mechanism by which the EU authorities could block funding to a member state that was committing serious violations of the rule of law.
