EU/UKRAINE : MACRO-FINANCIAL ASSISTANCE TO KYIV: WAITING FOR IMF.

PositionInternational Monetary Fund

European Commission Vice-President Olli Rehn proposed a further 1 billion in macro-financial assistance (MFA) to Ukraine in Brussels, on 19 March. "This financial aid will help in stabilising the worsening financial situation in Ukraine and therefore will be one vital part of achieving a solution to the crisis," Rehn said. It is aimed at covering part of the country's "urgent external financing needs".

The new MFA programme - already announced by the European Commission as part of its support package, on 5 March - would be implemented in parallel with the existing programme of 610 million, which has not been released yet.

As decided by the EU's leaders at their extraordinary summit of 6 March, release of the MFA is conditional on Ukraine reaching an agreement with the International Monetary Fund (IMF). The IMF is currently negotiating this with the Ukrainian government in Kyiv "at lightning speed," a German government spokesman commented. However, the agreement is not expected to be reached before this week's European Council.

MFA programmes are raised on the financial markets and are granted as loans by the EU. They represent "an exceptional crisis response available to neighbouring countries [ ] complementary to assistance provided by the IMF," the Commission stated.

Rehn further explained that the EU is going to pursue this type of financial assistance to Ukraine "moving in parallel" with the IMF in the short term but looking at broadening its approach, for example by collaborating with the private sector in the medium term.

The Commission's support package of 5 March amounts in its entirety to 11 billion over the coming years, and consists of various instruments, with the bulk of the money, around two-thirds, coming from the markets via the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).

Ukraine's immediate financial needs to avert default have been estimated by Prime Minister Arseniy Yatsenyuk as well as by independent experts as between 15 billion and 20 billion for 2014. From the IMF, Ukraine is hoping to secure a US$15 billion loan. On 18 March, the US Senate approved a possible US$1...

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