98/592/EC: Council Decision of 15 October 1998 providing supplementary macro-financial assistance for Ukraine
Date: 1998-10-15
Institutions: Council of the European Union
Subjects: EU aid, Ukraine, aid system, long-term credit

22. 10. 98

EN

Official Journal of the European Communities

L 284/45

COUNCIL DECISION

of 15 October 1998

providing supplementary macro-financial assistance for Ukraine

(98/592/EC)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 235 thereof,

Having regard to the proposal from the Commission (1),

Having regard to the opinion of the European Parlia-
ment (2),

Whereas the Commission has consulted the Monetary
Committee before submitting its proposal;

Whereas Ukraine is undertaking fundamental political
and economic reforms and is making substantial efforts to
implement a market economy model;

Whereas Ukraine and the European Communities and
their Member States have signed a Partnership and
Cooperation Agreement which will help the development
of a full cooperation relationship;

Whereas the authorities of Ukraine have requested finan-
cial assistance from the International Financial Institu-
tions, the Community and other bilateral donors;

Whereas Ukraine has agreed with the International
Monetary Fund (IMF) on a macro-economic programme
for the period July 1998 to June 2001 supported by an
‘Extended Fund Facility' (EFF) of approximately USD 2,3
billion; whereas policy-based loans to Ukraine in the
order of USD 2,1 billion are also expected from the
World Bank during the programme period;

Whereas, over and above the estimated financing which
could be provided by the IMF and the World Bank, and
after undisbursed commitments of bilateral donors under
previous programmes have been deducted, a residual
financing gap of some USD 2,2 billion remains to be
covered during the programme period in order to support
the policy objectives attached to the government’s reform
effort; whereas complementary official and private contri-
butions are expected from other bilateral donors;

Whereas by Decisions 94/940/EC (3) and 95/442/EC (4),
the Council approved macro-financial assistance for
Ukraine of up to a total amount of ECU 285 million for
support
programmes;
previous macro-economic
whereas, however, further official support is required in
the context of the present programme to support the

to

(1) OJ C 386, 20. 12. 1997, p. 10.
(2) OJ C 80, 16. 3. 1998, p. 29.
(3) OJ L 366, 31. 12. 1994, p. 32.
(4) OJ L 258, 28. 10. 1995, p. 63.

balance of payments, consolidate the reserve position and
facilitate the necessary structural adjustment of
that
country;

Whereas an additional Community long-term loan to
Ukraine is an appropriate measure to help ease the coun-
try’s external financial constraints;

Whereas commitments have been given by the Ukrainian
authorities, the Group of Seven and the European Union
in the context of the Memorandum of Understanding
signed on 21 December 1995 aimed at the closure of the
Chernobyl nuclear power plant by the year 2000;

Whereas the Community loan should be managed by the
Commission;

Whereas the Treaty does not provide, for the adoption of
this Decision, powers other than those of Article 235,

HAS DECIDED AS FOLLOWS:

Article 1

1.
The Community shall make available to Ukraine a
long-term loan facility of a maximum principal amount
of ECU 150 million with a maximum maturity of 10
years, with a view to ensuring a sustainable balance-of-
payments situation, strengthening the country’s reserve
position and comforting the implementation of
the
necessary structural reforms.

2.
To this end,
the Commission is empowered to
the
borrow, on behalf of
the European Community,
necessary resources that will be placed at the disposal of
Ukraine in the form of a loan.

This loan will be managed by the Commission in
3.
close consultation with the Monetary Committee and in a
manner consistent with any agreement reached between
the IMF and Ukraine.

Article 2

1.
The Commission is empowered to agree with the
Ukrainian authorities, after consulting the Monetary
Committee, the economic policy conditions attached to
the loan. These conditions shall be consistent with the
agreements referred to in Article 1(3).

L 284/46

EN

Official Journal of the European Communities

22. 10. 98

The Commission shall verify at regular intervals, in
2.
collaboration with the Monetary Committee and in close
coordination with the IMF, that the economic policy in
Ukraine is in accordance with the objectives of this loan
and that its conditions are being fulfilled.

Article 3

1.
The loan shall be made available to Ukraine in at
least two instalments. Subject to Article 2, the first instal-
ment is to be released on the basis of a satisfactory track
record of Ukraine’s macro-economic programme agreed
with the IMF in the context of the present EFF or of a
successor upper credit tranche arrangement.

2.
Subject to Article 2, the later instalment(s) shall be
released on the basis of a satisfactory continuation of the
arrangements referred to in paragraph 1 and not before a
period of three months has elapsed after the release of the
previous instalment.

The funds shall be paid to the National Bank of

3.
Ukraine.

Article 4

1.
The borrowing and lending operations referred to in
Article 1 shall be carried out using the same value date
and must not involve the Community in the transforma-
tion of maturities, in any exchange or interest rate risk, or
in any other commercial risk.

2.
The Commission shall take the necessary steps, if
Ukraine so requests, to ensure that an early repayment
clause is included in the loan terms and conditions and
that it may be exercised.

3. At the request of Ukraine, and where circumstances
permit an improvement in the interest rate on the loans,
the Commission may refinance all or part of its initial
borrowings or
restructure the corresponding financial
conditions. Refinancing or restructuring operations shall
be carried out in accordance with the conditions set out
in paragraph 1 and shall not have the effect of extending
the average maturity of
the borrowing concerned or
increasing the amount, expressed at the current exchange
rate, of capital outstanding at the date of the refinancing
or restructuring.

4. All related costs incurred by the Community in
concluding and carrying out the operation under this
Decision shall be borne by Ukraine.

5.
The Monetary Committee shall be kept informed of
developments in the operations referred to in paragraphs
2 and 3 at least once a year.

Article 5

At least once a year the Commission shall address to the
European Parliament and to the Council a report, which
will include an evaluation of the implementation of this
Decision.

Done at Brussels, 15 October 1998.

For the Council

The President

W. SCH(cid:154)SSEL