| Author (Corporate) | European Commission |
|---|---|
| Series Title | COM |
| Series Details | (2014) 182 final (19.03.14) |
| Publication Date | 19/03/2014 |
| Content Type | Policy-making |
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The Ukrainian economy has been in recession since the second half of 2012, with only one quarter of positive growth in the end of 2013, which was quickly reversed in the first two months of 2014 as a result of the deterioration of the political and security situation. The Ukrainian government lost access to international financial markets during 2013 as confidence dropped in view of the widening fiscal and current account and in the absence of much needed reforms. The unwillingness of the authorities to commit to reforms also prevented them from concluding a financing agreement with the IMF. As a result of large debt repayments in the fourth quarter of 2013 and beginning of 2014 and of the central bank's interventions to defend the currency peg against the dollar, reserves have dropped dramatically to $15.5 billion at the end of February, leaving Ukraine with a very weak and rapidly worsening balance-of-payments situation. The current political crisis has very damaging effects on Ukraine's already precarious economic and financial stability. The de facto interruption of Russia's assistance under its $15 billion package agreed last December, and the announced end to the reduced gas prices granted by Gazprom from April 2014 onwards, will deteriorate the situation even further. Under these circumstances Ukraine faces a serious risk of default in the near future. It is expected that the external financing needs of Ukraine will exceed the funding likely to be provided by the IMF. In this context, the European Commission announced on 5 March 2014 a package of financial support to Ukraine, that was welcomed by the EU Heads of State or Government the day after. One of the elements of the package is a new Macro-Financial Assistance (MFA) programme in the amount of up to €1 billion. The European Commission submits to the Council a proposal to grant MFA to Ukraine amounting to a maximum of €1 billion. The assistance would take the form of medium-term loans, with no grant component being envisaged given that Ukraine does not meet the eligibility criteria for the use of grants in MFA operations. |
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| Source Link | http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2014:182:FIN |
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| Countries / Regions | Europe, Ukraine |
