EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 29.10.2009 
SEC(2009) 1428 final 
  
COMMISSION STAFF WORKING DOCUMENT 
Ex ante evaluation statement Macr o-financial assistance to Ukraine 
  
Accompanying document to the 
  
Proposal for a Council decision providing macro-financial assi stance to Ukraine 
(COM(2009)580 final) 
 
EN 2   EN Ex ante evaluation statement 
Macro-financial assistance to Ukraine 
 
EN 3   EN TABLE OF CONTENTS 
1. Problem analysis and needs assessment....................................................................... 4 
1.1. Background ................................................................................................................ .. 4 
1.2. Recent economic developments and economic outlook .............................................. 4 1.3. Macroeconomic policy framework .............................................................................. 6 1.4. Ukraine's external financing needs .............................................................................. 7 2. Objectives and related indicators of  the macro-financial assistance............................ 9 
2.1. Objectives................................................................................................................ ..... 9 
2.2. Indicators................................................................................................................ .... 10 
3. Alternative delivery mechanis ms and risk assessment .............................................. 10 
3.1. Delivery mechanisms................................................................................................. 10 3.2. Risk assessment.......................................................................................................... 1 0 
4. Added value of Community involvement.................................................................. 11 5. Genval criteria on macro- financial assistance............................................................ 11 
5.1. Exceptional Character and Limited Timeframe......................................................... 11 5.2. Political pre-conditions .............................................................................................. 11 5.3. Compleme ntarity........................................................................................................ 12 
5.4. Conditionality............................................................................................................ . 12 
5.5. Financial discipline .................................................................................................... 13  
6. Planning of future monitoring and evaluation ........................................................... 13 6.1. Monitoring................................................................................................................ .. 13 
6.2. Evaluation ................................................................................................................ .. 13 
7. Achieving cost-effectiveness ..................................................................................... 14 
 
 
EN 4   EN 1. PROBLEM ANALYSIS AND NEEDS ASSESSMENT  
1.1. Background 
Ukraine's transition from state planned to market economy was comparatively difficult: in 
2008 Ukraine's real GDP still represented only 74% of its 1990 level1. In 2000, after a 
prolonged contraction, growth resu med; Ukraine registered an average growth rate of 6.9% 
during 2000-2008.  
The on-going global economic and financial crisis  had a very significant impact on Ukraine, 
probably the strongest in the European Union' s eastern neighbourhood. To counter the effects 
of the crisis, the authorities have put in pl ace a strong programme of economic adjustment, 
and secured a large financing from the IMF. Al so, the Ukrainian authorities have approached 
a large number of bilateral donors and creditors,  including the European Union, for financial 
support. 
In this context, the Commission proposes to the Council to provide to Ukraine a macro-
financial assistance (MFA) package amounti ng to EUR 610 million. The EU support would 
consist of the activation of a EUR 110 million loan from a previous MFA operation agreed by 
the Council in 2002 (Council Decision 2002/639/EC on 12 July  2002) but not implemented 
and of a new operation amounting to EUR 500 million. The 2002 MFA can be activated 
without requiring a new Council decision, already before the fo rmal adoption of the decision 
on the new amount. The reactivation of the assist ance decided back in 2002 would require the 
preparation of a new set of contractual documents, including the Memorandum of 
Understanding setting forth the economic and fina ncial conditions of the operation, and the 
loan agreement (see below). 
1.2. Recent economic developments and economic outlook  
Until mid-2008, Ukraine's economic performance was quite positive, and the country was 
successfully catching up after th e initial hardship of transitio n to market economy. However, 
since the onset of the global crisis, the economic situation of the country has deteriorated dramatically (see Table 1, on next page). In 2009, Ukraine's real GDP growth decelerated to 
2.5%, and in the first quarter of 2009, GDP is estimated to have cont racted by around 20% 
year-on-year. For the period January–June 2009,  industrial output decreased by 27.5% year-
on-year, while manufacturing indu stry contracted by 31.4%. The latest IMF projections for 
the current year point to a drop of real GDP by as much as 14%. 
The transmission mechanisms through which the global economic and financial crisis 
impacted on Ukraine's economy are broadly the sa me as for other countries of the region: 
firstly, an abrupt halt in access to internati onal finance for the domestic financial system, 
leading to the reduction of domestic credit grow th (Ukraine relied on external financing for 
credit growth much more than its neighbours, wh ich partially explains why it was hit harder); 
secondly, a trade shock resulting from the fall  in commodity prices (steel prices dropped 
between July 2008 and early 2009 by 65%) and from the fall in demand from Ukraine's main trading partners. Thirdly, the fact that imports  became more expensive, led by the increase in 
natural gas prices charged by Russia, which is  phasing out its remain ing gas subsidies.  
                                                
 
1 On a per capita basis this figure is 85%, reflecting Ukraine's sign ificant population loss 
 
EN 5   EN Table 1: Ukraine - Selected economic and social indicators 
 
Source: IMF 
Since the agreement between the Ukrainian authorities and the IMF on a crisis-related 
financial package, Ukraine's current account ha s substantially improved, from a deficit of 
7.2% of GDP in 2008 to an  expected surplus of 0.5% of GDP in 2009 – this on the back of the 
narrowing trade deficit. Trade de ficit was reduced as imports ha ve been falling faster than 
exports. In the first six months of 2009, e xports in goods and services decreased by 42.3%, 
while imports decreased by 49.8%. The narrowing of  the trade deficit re flects a stronger than 
 
EN 6   EN anticipated recession, and at the same time  the improvement Ukraine's competitiveness 
following the devaluation of  the domestic currency by 35% since September 2008.  
Yet, while the current account balance is pr ojected to achieve a small surplus in 2009, 
Ukraine has been suffering a capital account defi cit: loss of confidence meant capital flight, 
reversal of capital inflows and a reduction in foreign direct investment. Strong pressures on 
the capital account produced  strong pressures on in ternational reserves th at could only be kept 
at an appropriate level due to the fi nancing provided by the IMF under a Stand-by 
Arrangement (SBA - see below). The internationa l reserves of the National Bank of Ukraine 
(NBU) increased from USD 24.5 billion in April to USD 27.3 billion in end-June 2009, after 
the disbursement of the second tranche of the IMF's SBA (and they will increase again with 
the disbursement of the third tr anche of the loan in late July 2009). Yet, the country's reserve 
position remains fragile: although its exchange rate  regime is now more flexible, Ukraine still 
might need to use its reserves for the inte rventions on the foreign exchange markets. 
Also, the lower economic activity is resulting in a significant shortfa ll in fiscal revenue 
leading to the widening budget deficit. The late st projections made in the context of the 
second SBA programme review (see below) point to a budget defic it target of 8.6% of GDP in 
2009. This figure included for th e first time the operating loss of the state owned energy 
utility Naftogaz. 
After the very strong economic contraction of the fi rst quarter of 2009, there have been some 
signs of a modest economic stabilisation. Sin ce May 2009, industrial production indices show 
positive, albeit limited, month-on-month growth. Furthermore, some signs of stabilisation can be found in the hryvnia exchange rates: interb ank market rates appreciated by around 5% 
since May 2009, after an almost 50% depreciation in 2008.  
The inflation outlook has also been improving with consumer price inflation going down: 
while year-on-year CPI was 22.3% in January 2009, it decelerated to 15% in June 2009. For 2009 average, inflation is expected to be 16.3% . Also, for the first time since September 2008, 
real deposits into the Ukrainian banking system  have increased (albei t by only 0.6% m-o-m), 
leading to a suspension of restrictions on the withdrawal of term deposits. Net FDI inflows 
also increased, reaching an estimated USD 2.1 b illion up to June 2009, largely as a result of 
significant recapitalisation effort by fore ign banks with operations in Ukraine.  
1.3. Macroeconomic policy framework  
The request from the Ukrainian authorities le d to an agreement with the IMF on a 24-month 
stand-by arrangement for USD 16.5 billion whic h was approved in early November 2008. The 
exceptional access to IMF resource s (the amount made available by the Fund represents 802% 
of Ukraine's quota) was justified by a severe current account and capital account crisis that 
Ukraine was facing in late 2008. The adverse terms-of-trade shock related to the falling demand for such Ukrainian products such as stee l coincided with the shortfalls in financing 
related to the banking crisis a nd reduced depositor confidence. Fu rther factors that made this 
exceptional access to IMF financing possible incl uded (i) a sustainable position as far as 
external and public debt is concerned, (ii) good fu ture prospects of Ukraine to regain access to 
private capital markets, and (iii) the domestic commitment to policy reforms. 
The conditionalities of the original IMF SB A programme have focussed on three policy 
fields: (i) monetary and exchange rate policy, (ii) banki ng sector, and (iii) fiscal policies. In 
the first field, IMF programme demanded a more flexible exchange rate regime, abolishing 
 
EN 7   EN foreign exchange tax, and making the Central Bank sufficiently independent by reforming its 
Council. In the second field, bank resolution and financial support to systemic banks was required, while in the third field, fiscal target  of zero general government deficit was set out 
as a programme condition.  
The two-year IMF programme is considerably  frontloaded. The first tranche of a USD 4.5 
billion loan was disbursed di rectly after the IMF Board decision. However, the second 
disbursement was delayed due to disagreements  between the government of Ukraine and the 
IMF on issues concerning the benchmark of budge tary deficit, exchange rate regime and the 
degree of the independence of th e Central Bank. An agreement c ould only be reached in April 
2009; it led to the disbursement of the sec ond tranche of USD 2.8 billion in May 2009. The 
second review of the SBA was completed on 28 July 2009 unlocking the disbursement of the 
third loan tranche of USD 3.3 billion. 
A large part of the second tran che under the SBA (USD 1.9 billi on) and the full amount of the 
third tranche were channelled directly to the bud get in order to help Ukraine meet the general 
government’s external payment oblig ations. In particular, a part of  the third SBA instalment is 
expected to be used to cover sovereign bonds as well as Eurobond obligations of Naftogaz 
maturing in August and September 2009.  
The IMF’s Board had conditioned the completi on of the second programme review and the 
release of the third instalment under the pr ogramme to, inter alia, the adoption by the 
parliament of a number of amendments to ba nking laws and the law on the NBU that would 
increase the transparency and regulation of the banking sector, as well as to several energy 
sector reforms, in particular to the increase s in gas tariffs of Naftogaz for households and 
utilities (by 20% in autumn 2009, in Janua ry 2010 and quarterly increases hereafter  during 
2010). The gas sector reform is aimed at creating conditions for a development of a 
sustainable gas sector, capable of ensuring a sound functioning of Ukraine’s gas pipeline 
network.
2 
1.4. Ukraine's external financing needs 
The current IMF’s projections of Ukraine’s re sidual financing external needs in 2009 (see 
Table 2 on next page) point to a financi ng gap of about USD 2.8 billion not covered by 
already existing financing commitments from the IFIs (the IMF, the World Bank and the 
EBRD) and existing budget support (from the EU, under the ENPI). Out of these needs, some 
USD 560 million are expected to be covered by official debt re structuring and other sources, 
while the financing sources for the remaining USD 2.25 billion were still not identified by the 
time of the second programme review. The extern al financing needs for 2010 are expected to 
be lower than those for 2009. 
The European Commission is requested to prov ide MFA to cover part of these financing 
needs. The EU MFA would cover external fina ncing needs either of Ukraine’s state budget, 
along with financing forthcoming from the World Bank (DPL - Development Programme 
                                                 
2 The Euopean Commission has organised several meetings between the IFIs (the IMF, the World Bank, 
the EBRD and the EIB), the Europ ean gas industry, Ukraine's govern ment and Naftogaz and Russia's 
government and Gazprom on possible financing of the rehabilitation of the gas transportation network 
in Ukraine and possible support to Ukraine and/or Naftogaz for purchase of gas to ensure a smooth 
transit of natural gas from Russia to the EU. 
 
EN 8   EN Loan) and the IMF, or balance-of-payments n eeds of Ukraine’s banking and corporate sector, 
through reserve build-up. 
Indeed, Ukraine’s external financing needs re flect the financing need s of both the general 
government and the economy (enterprises and hous eholds). The bulk of the external financing 
needs of the non-government sector (including  state-owned corporat e entities) are the 
refinancing needs of the banking sector. In late 2008, the financ ial account expe rienced large 
outflows of short-term capital and a large drop of  foreign direct invest ment. The deterioration 
of the financial account would have  been even stronger if the roll -over rates on private sector 
debt had not held well since the beginning of 2009, in particular for corporations. The banking 
sector remains under great strain: depositor co nfidence is low and 20%  of all bank deposits 
were withdrawn between October 2008 and March 2009. Repayment of loans by households 
and corporates deteriorated significantly as a la rge share of loans has been denominated in the 
foreign currency while hryvnia experienced a st rong depreciation. A certain stabilisation was 
achieved in April 2009 as bank s started restructur ing their debt deno minated in foreign 
currency. However, bank credits are still expected  to contract in real terms in 2009, as banks 
still prefer to hoard liquidity. 
Table 2: Ukraine – external financing needs 
 
Source: IMF 
The external financing needs of the government sector are also substantial given that the 
overall financial requirements of the genera l government are not matched by the domestic 
 
EN 9   EN financial resources. The general government defici t is expected to reach 6% of GDP in 2009 
and 4.5% in 2010. Also, in 2009, the government will need to spend 2.6% of GDP to cover the operational losses of Naftogaz, the state owned major util ity company. For 2010, 
additional budgetary costs related to Naftogaz recapitalisation are estim ated at 1.0% of GDP. 
The fiscal deficit including the costs related to  the Naftogaz operations is thus estimated to 
8.6% of GDP in 2009 and 5.5% in 2010.
3 Two thirds of the government expenditure goes into 
public wages and social transfers, which imp lies that if external financing were not 
forthcoming, further cuts in social spending an d in capital investment would be needed. Also, 
the necessary reforms in the ener gy sector – in particular refo rms related to the functioning of 
Naftogaz – are expected to lead to high so cial costs for the Ukrainian population. These 
reforms need to be accompanied by important reforms in the social safety net.  
Finally, in line with the Memo randum of Understanding on co-ope ration in the field of energy 
between Ukraine and the European Union signed on 1 December 2005, the Ukrainian authorities are also planning the safety upgrad e of all nuclear units in the country to 
internationally recognised nuclear  standards. In this contex t, the Ukrainian state owned 
nuclear utility Energoatom has indicated its intention to appl y for a Euratom loan from the 
Community. 
2. O
BJECTIVES AND RELATED INDICATORS OF THE MACRO -FINANCIAL ASSISTANCE  
2.1. Objectives 
The general objectives  of the proposed macro-financia l assistance operation are to:  
• Contribute to covering Ukraine's external financing needs, including the needs of 
the banking and corporate s ectors and the State budget; 
• Help Ukraine alleviate the financial constraints on the implementation of the 
reform programme especially in the en ergy sector supporte d by the stand-by 
arrangement with the IMF; 
• Facilitate and encourage efforts of the authorities of Ukraine to implement 
measures identified under the EU-Ukr aine Action Plan and the Eastern 
Partnership; 
• Reinforce the EU role in the economic policy dialogue with the Ukrainian 
authorities. 
Linked to these general objectives of the programme, specific objectives in terms of 
financial and structural reforms will be detailed during the implementation of the 
programme and will be laid down in the Memorandum of Understanding that the 
Commission will negotiate with the authorities of Ukraine.  
                                                 
3 The fiscal needs in 2009 comprise also the cost of  the recapitalisation of bank s, estimated to 2.8% of 
GDP. However, the bulk of these costs (2.6% of GD P) are expected to be covered by the issuance of 
domestic bonds. The net fiscal cost of the bank recapitalisation in 2010 is projected to reach 0.5% of 
GDP. 
 
EN 10   EN 2.2. Indicators 
To monitor the fulfilment of the obj ectives of the programme throughout the 
implementation period of the assistance, the Commission will use two types of indicators:  
• Adherence to the IMF-supported programme , it will be a sine qua non for the 
implementation of the assistance;  
• Progress in the implementation of specific actions that will be part of the 
conditions for disbursement. Those actions will be specified in the aforementioned 
Memorandum of Understanding. They will be  consistent with the policy lines 
anchored in the IMF programme, as well as  with the priorities of the European 
Neighbourhood Policy and those of Eastern Partnership.  
3. A
LTERNATIVE DELIVERY MECHANISMS AND RISK ASSESSMENT  
3.1. Delivery mechanisms 
Macro-financial assistance is an untie d and undedicated m acro-economic support 
instrument, which helps the beneficiary coun try meet its external financing needs, 
including through a reinforcem ent of gross international reserves. Macro-financial 
assistance can be provided either in the form  of a loan, a grant or a combination of 
the two. Considering that Ukraine is a middle-income countr y, the Commission 
considers appropriate to provide  the total of this assistance in the form of a loan. The 
euro-denominated loan will be paid to the National Bank of Ukraine and may be 
transferred to a Treasury account to cover ex ternal financing needs of the budget.  
3.2. Risk assessment 
There is a risk that the macro-financial a ssistance which is not dedicated to specific 
expenses (contrary to projec t financing, for example), coul d be used in a fraudulent 
way. In general terms, this risk is re lated to factors su ch as Central Bank 
independence, quality of management systems and administrative procedures, 
control and oversight functions in the financ ial circuits, security of IT systems, and 
adequate internal and exte rnal audit capabilities.  
To mitigate the risks of fraudulent use,  several measures will be taken. The 
Memorandum of Understanding and the Loan  agreement will comprise a set of 
provisions on inspection, fraud prevention, au dits, and recovery of funds in case of 
fraud or corruption. Also, the assistance will  be paid to clearly identified accounts at 
the Central Bank of Ukraine. Moreover, before the agreement on the Memorandum 
of Understanding is reached, the Commission services will assess the reliability of financial circuits and admini strative procedures that are relevant to this type of 
assistance and will determine whethe r the framework for sound financial 
management of macro-financial assistance is sufficiently effective in Ukraine. In the 
light of this assessment, specific mechan isms applying to the management of the 
funds by the beneficiaries may be intr oduced in agreement with the national 
authorities. The Commission may also use othe r assistance instruments at its disposal 
to help the beneficiary authorities improve  their public finance management systems 
if this area is not sufficiently covered by ot her donors. Finally, the assistance will be 
 
EN 11   EN liable to verification, control and auditing pr ocedures under the res ponsibility of the 
Commission, including the European Antif raud Office (OLAF), and the European 
Court of Auditors. 
While seriously taking into account this ris k, the Commission services consider that 
there are sufficiently strong grounds to pro ceed with the MFA to Ukraine. The high 
financing needs faced by Ukraine plea d in favour of an urgent action.  
The Commission services will maintain clos e contacts with the authorities during the 
implementation of the macro-financial assi stance in order to address quickly any 
concerns that may arise.  
4. ADDED VALUE OF COMMUNITY INVOLVEMENT  
The Community financial support to Uk raine's economic rec overy reflects the 
country's strategic importance to the EU in the context of the European 
Neighbourhood Policy and of the newly esta blished Eastern Partnership. The main 
financial support instrument to Ukraine is the European Neighbourhood Partnership 
Instrument that has three priority objectives: democratic development, administrative capacity building and infrastruc ture development. The inst rument of macro-financial 
assistance is a policy-based instrument dir ected to alleviate short- and medium-term 
external financial needs. As a part of the overall EC package of assistance, it would 
contribute to support the European Union' s objectives of economic stability and 
economic development in Ukraine.  
5. G
ENVAL CRITERIA ON MACRO -FINANCIAL ASSISTANCE  
On 8th of October 2002 the Council reconfirmed a set of principles for the use of the 
Community's macro-financial assistance (so cal led Genval criteria). The five criteria 
are: (i) the exceptional char acter of the assistance, (i i) its complementarity to 
financing of the International Financial Institutions (IFIs), (iii) the existence of policy 
conditionality attached to the assistance, (i v) the existence of political pre-conditions 
and, finally (v) strong financial disciplin e that needs to accompany the MFA. 
5.1. Exceptional Character and Limited Timeframe 
Ukraine's financing requirements in 2009-2010 result from the country's high 
external and fiscal imbalances that are cl osely related to the global economic crisis. 
The on-going economic adjustment and the conditionality of the IMF programme will contribute to reducing these imbalances over the medium term. 
The exceptional character of the foreseen MFA is further stressed by the limited 
timeframe of the programme. The current  MFA proposal is onl y valid for 2009-2010 
for the duration of the IMF SBA arrangement. 
5.2. Political pre-conditions 
MFA is reserved to the third countries that are geographically close to the EU 
territory, that respect democracy and hu man rights and with which the EU has 
important political, economic and commercial ties. Ukraine fulfils these criteria. First, it has direct borders with the EU. Second, its economic and political relations 
 
EN 12   EN with the EU are strong: it is an active  EU partner in the European Neighbourhood 
Policy as well as in the recently establis hed Eastern Partnership. Since March 2007, 
Ukraine negotiates an Association Agreem ent with the EU that would replace the 
existing Partnership and Cooperation Agr eement and that includes a deep and 
comprehensive free trade area. Third, Ukra ine has demonstrated a good record of 
macroeconomic management and economic refo rms in the recent past  and it respects 
democracy and human rights. 
5.3. Complementarity  
The proposed macro-financial assistance will  be complementary to the existing EU 
financing, to the IMF financing and to the financial support of other international 
donors.  
The MFA programme is complementary to other EC financing, in particular to 
medium-term ENPI budget support implemen ted within the framework of the EU 
Country Strategy for cooperation. Thus, it can  help increase the EU's leverage on 
Ukraine's policy making as well as help Ukraine to overcome the current deep economic crisis.  
The complementarity with the IMF programme is also assured. An MFA can only 
take place when a residual external financ ing gap is identified over and above the 
IMF resources and under the condition of a fair burden sharing. A residual external 
financing gap has been identified by the IMF, this assessment constitutes the basis for Commission's MFA programme  proposal that would cover roughly one third of 
the external financing gap remain ing after the IM F intervention.  
The MFA programme is also complementary to the external financing coming from 
the IFIs more generally. In particular, the MFA is provided in the moment when the 
EU is also helping to mobilise financing to  support the reform of the Ukraine energy 
sector. The Commission, toge ther with the World Bank, the EBRD and the EIB, 
intends, subject to the indivi dual rules, capacities and conditions of th e IFIs, to work 
together in the development of a suppor t package to the Ukrainian authorities 
designed to assist in devel oping a sustainable solution to Ukraine’s medium-term gas 
transit and gas payment obligations. The MF A under consideration is not intended to 
be directly linked to that package. However, it woul d support Ukraine’s economic 
stabilization and reform, including refo rm of the gas sector and accompanying 
reform of the social safety net.  
5.4. Conditionality 
The disbursement of MFA assistance will be conditional on the IMF Board decisions 
to approve programme reviews under th e SBA and on Ukraine's subsequent 
decisions to draw funds from the IMF fina ncial facility. In addition, a Memorandum 
of Understanding (MoU) will be negotiated between the Commission and the Ukrainian authorities. The MoU will contai n specific structural reform measures 
related to the fields of cooperation between the EU and Ukraine. For example, in the 
field of public finance management the Co mmission plans to build  on the results of 
policy dialogue conducted in the framework of implementation of the EU-Ukraine ENP Action Plan. Furthermore, the conditiona lity should include the improvement of 
social safety net to offset the social c onsequences of the energy sector reforms. 
 
EN 13   EN 5.5. Financial discipline 
The planned assistance woul d be provided in the form of a loan and should be 
financed through the borrowing operation that the Commission will conduct on behalf of the EU. The budgetary costs of  the assistance will correspond to the 
provisioning, at a rate of  9%, of the amounts disburse d in the guarantee fund for 
external lending of the EU , from budget line 01 04 01 14 ("the provisioning of the 
Guarantee Fund"). Assuming that the loan disbursements will be made in 2009 for the amount of EUR 100 million and in 2010 for the amount of EUR 510 million and 
according to the rules governing the guarantee fund mechanism, the provisioning will take place in the 2011-2012 budget. Due to the constraints on the loan capacity 
at the time of the prepara tion of the relevant annual  budget, the Commission may use 
additional commitment appropria tions under the Heading 4 in 2012. 
To ascertain that the beneficiary has in  place a sound financial management in line 
with the requirements of the Financial regulation, the Commission services continue regular monitoring and intend – with the help of an external consul tant - to carry out 
an Operational Assessment of the reliability  of financial circu its and administrative 
controls of the different entities invol ved in the management of the EU funds, 
especially at the Ministry of Finance and at the Central Bank of Ukraine.  
6. P
LANNING OF FUTURE MONITORING AND EVALUATION  
This assistance is of exceptional and macro-economic nature and its monitoring and 
evaluation will be undertaken in line with the standard Commission procedures.  
6.1. Monitoring 
The monitoring system will be ensured by the provision of reports and data by the 
authorities and by the organi sation of review missions to Ukraine by Commission 
staff. Although this assist ance is centrally managed, where appropriate, the EC 
Delegation in Kyiv will also be calle d to provide addi tional reporting. The 
monitoring of the action by the Commission serv ices will take place on the basis of 
macro-economic and structural policy indi cators which are to be agreed with the 
Ukrainian authorities in a Memorandum of Understanding. In this process, the Commission services may also monitor key areas of the public finance management 
system, to be identified in the update of th e Operational Assessment so as to have the 
relevant information on any changes in the control environment. 
An annual report to the European Pa rliament and to the Council on the 
implementation of macro-financ ial assistance is foreseen in the proposed text of the 
Council Decision. 
6.2. Evaluation 
Two to three ex-post evalua tions of macro-financial assistance operations are 
planned per year in the Multi-annual Ev aluation Programme of the Economic and 
Financial Affairs Directorat e-General. An ex-post evaluation of the proposed macro-
financial assistance to Ukraine will be  launched upon the completion of the 
operation. A provision foreseeing the ex-post evaluation will be included in the 
 
EN 14   EN Memorandum of Understanding. Financial re sources for this ev aluation will be 
drawn from the macro-economic assistance budget line. 
7. ACHIEVING COST -EFFECTIVENESS  
In implementing the programme, the Commission will be guided by the following 
principles:  
• As soon as the Council has adopted the proposal, the Commission will negotiate 
with the Ukrainian authorities a Memorandum of Understanding laying out the 
conditions for the release of the EU assist ance, as well as a loan agreement. Each 
tranche of the proposed assistance will be  made available by the Commission to 
Ukraine on the basis of a satisfactory trac k record of the implementation of the 
IMF programme and the economic policy and financial conditions attached to the 
assistance.  
• In negotiating specific policy conditions , the Commission will draw on all the 
expertise, including of the Internationa l Monetary Fund and the World Bank and 
of bilateral and multilateral aid agenci es active in Ukraine. In addition, the 
Commission will aim at synergies with ot her Community policies and instruments 
(notably ENPI as indicated above) that could be used to support the 
implementation by the beneficiary of the rele vant measures (notably in the area of 
public finance management). Where appropr iate, links to any related action under 
the European Neighbourhood Policy or East ern Partnership or findings of the 
Progress Reports would be established.