European Parliament approves €1.8 billion EU loan to Ukraine
EU
plans to lend Ukraine €1.8 billion to help plug its short-term balance of
payments gap were approved by MEPs on Wednesday. The EU will borrow the money
externally and lend it on to Ukraine with the same interest rate. The
disbursement will be tied to Ukraine pledging structural reforms to tackle
problems that contributed to the current crisis.
“The
result of today’s vote is a strong political message, not only to Ukraine to
show that the EU stands firmly by it, but also to those countries which seek to
see us divided in helping Ukraine”, said rapporteur Gabrielius Landsbergis (EPP, LT).
MEPs approved
the Commission’s proposal, without amending it, by 492 votes to 107 with 13
abstentions.
Ukraine’s
cash flow difficulties
Ukraine’s
acute economic crisis is rooted in long-standing structural problems, such as
corruption, and aggravated by the armed conflict in the east of the country,
trade restrictions imposed by Russia and the escalation of a natural gas
dispute with it. Ukraine has lost its access to international debt markets so
can no longer borrow money itself.
Where
will the money come from?
The
European Commission will raise funds on the international bond market and lend
them on to Ukraine, at no extra interest beyond what the EU has to pay to its
external lenders.
Ukraine
would have to return the money within fifteen years of borrowing it.
Reforms
in exchange for the loan
Terms
for the loan still need to be agreed by the EU and Ukraine in a memorandum of
understanding which commits Ukraine to a reform programme
designed to remedy the accumulated fundamental weaknesses that helped to cause
the current deficit.
The
draft deal includes public finance management reforms, anti-corruption
measures, tax administration changes; reforms in the energy and financial
sectors; and measures to improve the business environment.
Once
the EU and Ukraine sign the deal , the money will go
straight into Ukraine’s budget. Two thirds of the agreed amount might be
disbursed by the end of 2015 and the final tranche in the first quarter of
2016.
European Parliament