The European Commission announced on Wednesday (22 April) a €3 billion loan package for ten enlargement and neighbourhood countries to limit the economic fallout of the pandemic.
The so-called “macro-financial assistance,” a complement to the International Monetary Fund’s (IMF) support, will be given in the form of highly favourable loans designed to improve the macroeconomic stability of countries, freeing up national resources to protect citizens and mitigate the socio-economic consequences of COVID-19.
More than a third of the proposed funds will go to Ukraine (€1.2 billion) with another 20% (€600 million) earmarked for Tunisia.
The IMF estimates Ukraine will be facing an overall external financing gap of $12 billion in 2020.
Ukraine is already set to receive a combined $5 billion in IMF, EU and World Bank loans, but the remaining $7 billion “would need to be covered through additional official financing or through a drawdown of official international reserves,” said the Commission’s proposal.
Ukraine is currently trying to secure a separate $8 billion loan package from the IMF, contingent on the adoption of a banking bill that will prevent former owners of banks from regaining their assets after insolvency.
“It is important to underline that the IMF programme being on track is a condition for receiving the assistance announced in today’s proposal,” a Commission spokesperson said.
Ukrainian President Volodymyr Zelenskiy called the package an “unprecedented sum of macro-financial assistance.”
“The EU decision is one of solidarity and also proves Ukraine was right to make its European choice,” Zelenskiy wrote on Twitter. “A friend in need is a friend indeed.”
The rest of the funds will be divided between Bosnia-Herzegovina (€250 million), Jordan (€200 million), Albania (€180 million), North Macedonia (€160 million), Georgia (€150 million) Kosovo (€100 million), Moldova (€100 million) and Montenegro (€60 million).
Serbia, the biggest Western Balkan country, is not one of the beneficiaries as it would have had to request emergency liquidity assistance from the IMF.
“The Serbian authorities currently do not see a need for external financial assistance, and thus decided not to turn to the IMF,” the spokesperson told EURACTIV, stressing that “Serbia was made aware by Commission services of the possibility” of assistance.
The first instalment of loans will be available as soon as the Council and the Parliament approve the proposal, with the second instalment ready to be disbursed after partner countries meet their reform commitments, as early as the fourth quarter of 2020.
The Commission plans to set out “economic policy and financial conditions, focusing on structural reforms and sound public finances” in a memorandum of understanding signed separately with each country before the first instalment of the loans.
The support comes on the top of a support package for African and other partner countries hit by the coronavirus pandemic, announced earlier this month.
[Edited by Zoran Radosavljevic]