Proposal for a Council Decision providing macro-financial assistance to Ukraine (SEC(2009)1428)
Date: 2009-10-29
Institutions: European Commission
Subjects: EU aid, European neighbourhood policy, Ukraine, economic situation, economic stabilisation, financial aid, macroeconomics

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 29.10.2009 
COM(2009)580 final 

2009/0162 (CNS) 

Proposal for a 

COUNCIL DECISION 

providing macro-financial assistance to Ukraine 

(SEC(2009)1428) 

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EXPLANATORY MEMORANDUM 

(1) 

CONTEXT OF THE PROPOSAL 

11 

•  Grounds for and objectives of the proposal 

The Commission proposes to provide to Ukraine macro-financial assistance (MFA) in 
the form of a loan of up to EUR 500 million. The proposed assistance is intended to 
contribute  to  covering  Ukraine's  general  balance-of-payments  needs  and  the  external 
financing  needs  of  the  State  budget  identified  by  the  International  Monetary  Fund 
(IMF). It will support the authorities' stabilisation programme with a view to ensuring 
sustainable  fiscal  and  external  accounts,  and  will  thus  help  Ukraine  address  the 
consequences of the global financial crisis. 

The  proposed  Community  macro-financial  assistance  will  complement  support  from 
the IMF foreseen under the Stand-By Arrangement (SBA) agreed by the IMF board in 
November  2008.  It  will  also  complement  Community  macro-financial  assistance  to 
Ukraine of up to EUR 110 million granted by the Council in 20021 which has not yet 
been  implemented.  The  Commission  intends  to  implement  this  assistance  as  a  first 
stage of the overall EU financial support to Ukraine that will thus amount to EUR 610 
million. 

Community MFA will be exceptional and limited in time, and will be conditional, in 
particular, on progress in the implementation of the current IMF programme and on the 
successful  fulfilment  of  economic  policy  conditions  that  will  be  attached  to  this 
assistance. 

120 

•  General context  

Ukraine's transition from state planned to market economy was comparatively difficult: 
in  2008  Ukraine's  real  GDP  was  still  well  below  its  1990  level.  In  2000,  after  a 
prolonged  contraction,  growth  resumed;  the  average  growth  rate  in  the  period  2000-
2008 was 6.9%. However, since the onset of the global crisis, the economic situation of 
the country has deteriorated dramatically. In 2008, Ukraine's real GDP growth was just 
2.5%, and in the first quarter of 2009, GDP is estimated to have contracted by around 
20%  year-on-year.  The  latest  IMF  projections  for  the  current  year  point  to  a  drop  of 
real GDP by as much as 14%. 

Since  agreeing  on  a  package  of  crisis-related  adjustments,  which  included  currency 
devaluation,  Ukraine's  current  account  has  substantially  improved,  from  a  deficit  of 
7.2%  of  GDP  in  2008  to  a  surplus,  expected  to  be  0.5%  of  GDP  in  2009.  This 
improvement  reflects  primarily  the  narrowing  trade  deficit.  Yet,  while  the  current 
account  balance  is  projected  to  achieve  a  small  surplus  in  2009,  Ukraine  has  been 
suffering a capital account deficit: 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 international reserves that could only be 
kept at an appropriate level due to the financing provided by the IMF under the SBA. 
Also, the lower economic activity is resulting in a significant shortfall in fiscal revenue 
resulting in the widening budget deficit. The latest projections made in the context of 

1 

Council Decision 2002/639/EC of 12 July 2002, OJ L 209, 6.8. 2002, p. 22. 

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the second SBA programme review point to a budget deficit target of 8.6% of GDP in 
2009.  

The  economic  policy  decisions  adopted  by  the  Ukrainian  authorities  in  autumn  2008 
made  it  possible  to  reach  an  agreement  with  the  IMF  on  a  financing  arrangement.  In 
November  2008,  the  IMF  Board  approved  a  24-month  SBA  for  USD  16.5  billion, 
which  represents  802%  of  Ukraine's  drawing  rights.  The  exceptional  access  has  been 
justified by a severe current account and capital account crisis that Ukraine had been 
facing in late 2008. The adverse terms-of-trade shock related to a reduction of demand 
for products such as Ukrainian steel coincided with the shortfalls in financing related to 
the  banking  crisis  and  reduced  depositor  confidence.  Further  factors  that  made  this 
exceptional access to IMF financing possible included (i) a sustainable position as far 
as external and public debt is concerned, (ii) good future prospects of Ukraine to regain 
access to private capital markets, and (iii) the domestic commitment to policy reforms. 

The two-year IMF programme is considerably frontloaded. The first tranche of a USD 
4.5  billion  loan  was  disbursed  directly  after  the  IMF  Board  decision.  The  second 
disbursement  amounting  to  USD  2.8  billion,  initially  delayed  due  to  disagreements 
between  the  government  of  Ukraine  and  the  IMF  on  several  key  aspects  of  the 
programme,  was  finally  made  in  May  2009.  A  large  part  of  the  second  loan  tranche 
(USD  1.9  billion)  was  channelled  directly  to  the  budget  to  help  Ukraine  meet  its 
external debt obligations. A disbursement of the third loan tranche of USD 3.3 billion 
was  approved  by  the  IMF  Board  in  late  July  2009.  The  tranche  was  allocated  to  the 
budget in full, also to meet external payment obligations of the general government.  

130 

•  Existing provisions in the area of the proposal 

In  2002,  the  Council  adopted  a  decision  providing  medium-term  macro-financial 
assistance to Ukraine of up to EUR 110 million. No disbursements have been made on 
this  programme  as  the  conditions  for  such  disbursements  were  not  met.  The  Council 
decision is still in force and the Commission intends to implement it, prior to the new 
proposed assistance. 

140 

•  Consistency with other policies and objectives of the Union 

The  MFA  programme  is  complementary  to  other  EC  financing,  in  particular  to 
medium-term ENPI budget support implemented within the framework of the Country 
Strategy for EU cooperation with Ukraine. 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 MFA programme is also complementary to the external financing 
coming from the IMF and the World Bank and from the bilateral donors.  

MFA  is  provided  at  a  time  when  the  EU  is  also  helping  to  mobilise  financing  to 
support  the  reform  of  the  Ukrainian  energy  sector.  The  Commission  and  the 
Institutions  involved  (the  IMF,  the  World  Bank,  the  EBRD  and  the  EIB),  subject  to 
their  individual  rules,  capacities  and  conditions,  are  working  together  on  a  support 
package  to  the  Ukrainian  authorities  designed  to  assist  in  developing  a  sustainable 
solution  to  Ukraine’s  medium-term  gas  transit  and  gas  payment  obligations.  The 
proposed MFA is not intended to be directly linked to that package. However, it would 
support, 
through  appropriate  conditionality,  Ukraine’s  economic 
stabilisation  and  reforms,  including  reforms  of  the  gas  sector  and  accompanying 
reforms of the social safety net.  

in  particular 

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(2) 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

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229 

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During the preparation of the present Commission proposal, the Commission services 
have  been  in  contact  with  the  Ukrainian  authorities,  the  IMF,  the  World  Bank,  the 
EBRD  and  with  potential  bilateral  donors  and  creditors,  to  discuss  assistance  needs. 
The Economic and Financial Committee (EFC) has been consulted and no objections 
were raised.  

Following  the  adoption  of  the  Council  Decision,  the  Commission  services  will 
negotiate with the authorities of Ukraine a Memorandum of Understanding and a Loan 
Agreement to lay down in detail the implementation modalities of the assistance.  

•  Collection and use of expertise 

An  Operational  Assessment  assessing  the  quality  and  reliability  of  Ukraine's  public 
financial  circuits  and  administrative  controls  will  be  carried  out  by  the  Commission 
with the assistance of external consultants. 

•  Impact assessment  

Macro-financial  assistance  will  have  an  immediate  impact  on  Ukraine's  balance  of 
payments  and  the  State  budget  and  will  in  this  way  contribute  to  the  alleviation  of 
financial  constraints  on  the  implementation  of  the  authorities'  economic  programme. 
Macro-financial  assistance  will  further  support  the  general  objectives  of  the 
stabilisation programme agreed with the IMF. 

Project  finance  or  technical  assistance  would  not  be  suitable  to  address  these 
macroeconomic  objectives.  The  assistance  will  be  delivered  as  balance-of-payments 
and  budget  support,  so  that  the  disbursements  will  contribute  to  the  building  up  of 
reserves in the Central Bank and to meeting the external financing needs of the State 
budget, as foreseen under the macro-economic stabilisation programme. 

(3) 

LEGAL ELEMENTS OF THE PROPOSAL 

305 

•  Summary of the proposed action  

The Community shall make available to Ukraine macro-financial assistance in the form 
of a loan of up to EUR 500 million. To this end, the Commission shall be empowered 
to  borrow  the  corresponding  amount  on  the  capital  markets  or  from  financial 
institutions. This will complement the amount of EUR 110 million granted in Council 
decision  2002/639/EC,  which  will  be  implemented  as  a  first  stage  of  the  overall  EU 
financial support to Ukraine. 

The assistance will be made available in two instalments. The maximum average loan 
maturity shall not exceed 15 years. The assistance will be managed by the Commission 
which  shall  agree  with  the  authorities  the  specific  economic  policy  and  financial 
conditions attached to the payment of the loan instalments. Specific provisions on the 
prevention  of  fraud  and  other  irregularities,  consistent  with  the  Financial  Regulation, 
will be duly taken into account.  

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The  assistance  will  be  fully  consistent  with  the  macroeconomic  targets  already  set  in 
Ukraine's  economic  policy  plans  agreed  with  the  IMF.  It  will  be  also  consistent  with 
longer-term  policy  objectives  contemplated  in  the  EU-Ukraine  Partnership  and 
Cooperation Agreement and more recently in the EU-Ukraine Action Plan adopted in 
2005  in  the  framework  of  the  European  Neighbourhood  Policy  and  the  Association 
Agreement currently under negotiation. As regards specific economic policy conditions 
attached to the disbursement of the loan, the Commission intends to focus on a limited 
number  of  areas  including  public  finance  management  and  social  safety  net  reforms 
related to energy sector reforms. Also, the Commission may consider targeting specific 
policies  of  particular  importance,  such  as  priorities  identified  in  the  report  on 
implementation  of  the  European  Neighbourhood  Policy  (ENP  Progress  Report)  of 
April 2009, or measures deemed appropriate following the Operational Assessment. 

•  Legal basis 

Article 308 of the Treaty. 

•  Subsidiarity principle 

The proposal falls under the exclusive competence of the Community. The subsidiarity 
principle therefore does not apply. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reasons. 

The amount of the new assistance proposed –up to EUR 500 million– corresponds to 
approximately  25%  of  the  residual  external  financing  needs  of  Ukraine  for  the  year 
2009  over  and  above  macro-economic  support  provided  by  the  IMF  and  the  World 
Bank. Those needs are estimated by the IMF at USD 2.8 billion, or EUR 2 billion. This 
burden sharing by the Community takes account of the current exceptional juncture, as 
the unfolding of the global crisis is having a severe effect on Ukraine's economy.  

•  Choice of instruments 

Proposed instruments: other. 

In the absence of a framework regulation for the macro-financial assistance instrument, 
ad hoc Council decisions under Article 308 of the Treaty are the only available legal 
instrument for this assistance. 

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(4) 

Budgetary implication 

401 

2 

In line with the Guarantee Fund Regulation2, the provisioning of the Guarantee Fund is 
expected to take place in 2012 and to amount to a maximum of EUR 45 million. This 
corresponds to 9% of the EUR 500 million loan expected to be disbursed in 2010. 

Article 5 of Council Regulation (EC, Euratom) No 480/2009 of 25 May 2009 establishing a Guarantee 
Fund for external action (codified version). The provisioning is appropriated from "the provisioning of 
the Guarantee Fund" (budget line 01 04 01 14). 

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(5) 

ADDITIONAL INFORMATION 

•  Review/revision/sunset clause 

533 

The proposal sets a limited availability period. 

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2009/0162 (CNS) 

Proposal for a 

COUNCIL DECISION 

providing macro-financial assistance to Ukraine 

THE COUNCIL OF THE EUROPEAN UNION, 

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

Having regard to the proposal from the Commission3, 

Having regard to the opinion of the European Parliament4, 

After consulting the Economic and Financial Committee, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

Relations  between  Ukraine  and  the  European  Union  are  developing  within  the 
framework  of  the  European  Neighbourhood  Policy.  In  2005,  the  Community  -and 
Ukraine  agreed  on  a  European  Neighbourhood  Policy  Action  Plan  identifying 
medium-term  priorities  in  EU-Ukraine  relations.  Since  2007,  the  Community  -  and 
Ukraine  have been  negotiating  an Association  Agreement  that  is expected  to  replace 
the existing Partnership and Cooperation Agreement.  The framework of  EU-Ukraine 
relations is further enhanced by the newly launched Eastern Partnership. 

The Ukrainian economy has been increasingly hit by the international financial crisis 
with  dramatically  declining  output,  deteriorating  fiscal  position  and  rising  external 
financing needs.  

Ukraine's economic stabilisation and recovery is supported by financial assistance of 
the  International  Monetary  Fund  (IMF).  The  IMF  Stand-By  Arrangement  (SBA)  for 
Ukraine was approved in November 2008.  

Following  a  further  deterioration  of  the  fiscal  position,  a  large  part  of  the  second 
tranche under the IMF's SBA and the full amount of the third tranche were channelled 
to the budget. 

Ukraine  has  requested  Community  macro-financial  assistance  in  view  of  the 
worsening economic situation and outlook.  

3 
4 

OJ C […], […], p. […]. 
OJ C […], […], p. […]. 

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(6) 

(7) 

(8) 

Given that a residual financing gap in 2009-2010 remains in the balance of payments, 
macro-financial assistance is considered an appropriate response to Ukraine's request 
to support economic stabilisation in conjunction with the current IMF programme. The 
present  financial  assistance  is  also  expected  to  contribute  to  alleviate  the  external 
financing needs of the State budget. 

The macro-financial assistance is provided to Ukraine in addition to the loan facility 
based  on  Council  Decision  2002/639/EC  of  12  July  2002  providing  supplementary 
macro-financial assistance to Ukraine5, 

In order to ensure efficient protection of the Community's financial interests linked to 
the present financial assistance, it is necessary to provide for appropriate measures by 
Ukraine related to the prevention of, and the fight against, fraud, corruption and any 
other irregularities linked to this assistance, as well as for controls by the Commission 
and audits by the Court of Auditors. 

(9) 

The release of the Community financial assistance is without prejudice to the powers 
of the budgetary authority. 

(10)  This  assistance  should  be  managed  by  the  Commission,  in  consultation  with  the 

Economic and Financial Committee. 

(11)  The Treaty does not provide, for the adoption of this Decision, powers other than those 

of Article 308, 

HAS DECIDED AS FOLLOWS:  

Article 1 

1. 

2. 

3. 

4. 

The  Community  shall  make  available  to  Ukraine  macro-financial  assistance  in  the 
form of a loan facility with a maximum principal amount of EUR 500 million and a 
maximum  average  maturity  of  15  years  with  a  view  to  supporting  Ukraine's 
economic stabilisation and alleviating its balance of payments and budgetary needs 
as identified in the current IMF programme.  

To  this  end,  the  Commission  is  empowered  to  borrow  on  behalf  of  the  European 
Community the necessary resources.  

The  release  of  the  Community  financial  assistance  shall  be  managed  by  the 
Commission in a manner consistent with the agreements or understandings reached 
between the IMF and Ukraine.  

The  Community  financial  assistance  shall  be  made  available  for  two  years  starting 
from  the  first  day  after  the  entry  into  force  of  the  Memorandum  of  Understanding 
referred  to  in  Article  2(1).  However,  if  circumstances  so  require,  the  Commission, 
after consultation of the Economic and Financial Committee, may decide to extend 
the availability period by a maximum of one year. 

5 

OJ L 209, 6.8. 2002, p. 22. 

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1. 

2. 

3. 

1. 

2. 

3. 

1. 

2. 

Article 2 

The  Commission  is  empowered  to  agree  with  the  authorities  of  Ukraine,  after 
consulting  the  Economic  and  Financial  Committee,  the  economic  policy  conditions 
attached  to  the  Community  macro-financial  assistance,  to  be  laid  down  in  a 
Memorandum  of  Understanding.  The  conditions  shall  be  consistent  with  the 
agreements  or  understandings  reached  between  the  IMF  and  Ukraine.  The  detailed 
financial terms of the assistance shall be laid down in a Loan Agreement to be agreed 
between the Commission and the authorities of Ukraine.  

During the implementation of the Community financial assistance, the Commission 
shall  monitor  the  soundness  of  Ukraine's  financial  arrangements,  administrative 
procedures, and the internal and external control mechanisms which are relevant to 
such assistance. 

The Commission shall verify at regular intervals that Ukraine's economic policies are 
in  accordance  with  the  objectives  of  the  Community  assistance  and  that  the  agreed 
economic  policy  conditions  are  being  satisfactorily  fulfilled.  In  doing  so,  the 
Commission shall coordinate closely with the IMF and the World Bank, and, when 
required, with the Economic and Financial Committee. 

Article 3 

The Community financial assistance shall be made available by the Commission to 
Ukraine in two loan instalments, subject to the conditions of paragraph 2. The size of 
each instalment will be laid down in the Memorandum of Understanding.  

The Commission shall decide on the release of the instalments subject to satisfactory 
implementation  of  the  economic  policy  conditions  agreed  in  the  Memorandum  of 
Understanding.  The  disbursement  of  the  second  instalment  shall  not  take  place 
earlier than three months after the release of the first instalment. 

The  Community  funds  shall  be  paid  to  the  National  Bank  of Ukraine.  Subject  to 
provisions  to  be  agreed  in  the  Memorandum  of  Understanding,  including  a 
confirmation of residual budgetary financing needs, the funds may be transferred to 
the Treasury of Ukraine as the final beneficiary. 

Article 4 

The borrowing and the lending operations referred to in this Decision shall be carried 
out  in  euro  using  the  same  value  date  and  shall  not  involve  the  Community  in  the 
transformation  of  maturities,  in  any  exchange  or  interest  rate  risks,  or  in  any  other 
commercial risk. 

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 is 
matched  by  a  corresponding  clause  in  the  terms  and  conditions  of  the  borrowing 
operations.  

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3. 

4. 

5. 

At  the  request  of  Ukraine,  and  where  circumstances  permit  an  improvement  of  the 
interest  rate  of  the  loan,  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  of capital outstanding  at the date of 
the refinancing or restructuring. 

All costs incurred by the Community which are related to the borrowing and lending 
operations under this Decision shall be borne by Ukraine. 

The Economic and Financial Committee shall be kept informed of developments in 
the operations referred to in paragraphs 2 and 3. 

Article 5 

The Community financial assistance shall be implemented in accordance with the provisions 
of  Council  Regulation  (EC,  Euratom)  No  1605/2002  of  25  June  2002  on  the  Financial 
Regulation  applicable  to  the  general  budget  of  the  European  Communities6  and  its 
implementing  rules7.  In  particular,  the  Memorandum  of  Understanding  and  the  Loan 
Agreement to be agreed with the authorities of Ukraine shall provide for appropriate measures 
by Ukraine in relation to the prevention of, and the fight against, fraud, corruption and other 
irregularities affecting the assistance. They shall also provide for controls by the Commission, 
including  the  European  Anti-Fraud  Office  (OLAF),  with  the  right  to  perform  on-the-spot 
checks  and  inspections,  and  for  audits  by  the  Court  of  Auditors,  where  appropriate,  to  be 
carried out on the spot. 

Article 6 

By 31 August of each year the Commission shall submit to the European Parliament and to 
the  Council  a  report,  including  an  evaluation  of  the  implementation  of  this  Decision  in  the 
preceding year. The report shall indicate the connection between the policy conditions as laid 
down  in  a  Memorandum  of  Understanding  pursuant  to  Article  2(1),  Ukraine's  on-going 
economic and fiscal performance, and the Commission's decisions to release the instalments 
of the assistance. 

This  Decision  shall  take  effect  on  the  day  of  its  publication  in  the  Official  Journal  of  the 
European Union. 

Article 7 

6 
7 

OJ L 248, 16.9.2002 p. 1.  
Commission Regulation (EC, Euratom) No 2342/2002, OJ L 357, 31.12.2002, p. 1. 

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Done at Brussels, […] 

For the Council 
Joaquin ALMUNIA 
Member of the Commission 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

NAME OF THE PROPOSAL: 

Macro-financial assistance to Ukraine 

2. 

ABM / ABB FRAMEWORK 

Policy Area(s) concerned and associated Activity/Activities: 

Title 01 – Economic and Financial Affairs, 03 – International economic and financial 
affairs 

3. 

BUDGET LINES 

3.1. 

Budget  lines  (operational  lines  and  related  technical  and  administrative 
assistance lines (ex- B.A lines)) including headings: 

01 04 0114 Provisioning of the Guarantee Fund  

3.2. 

Duration of the action and of the financial impact: 

Disbursements  will  take  place  over  2010  in  two  tranches.  However,  delays  that 
would prolong the operation cannot be excluded.  

3.3. 

Budgetary characteristics: 

Budget line 

Type of 
expenditure 

New 

EFTA 
contribution 

Contributions 
from applicant 
countries 

Heading in 
financial 
perspective 

01.04.01.14 

Comp 

Diff 

NO 

NO 

NO 

No 4 

Assistance in the form of loan 

01 04 01 14 – Provisioning of the Guarantee Fund 

The Guarantee Fund for external actions has to be provisioned according to the Fund 
Regulation  as  amended.  In  line  with  this  Regulation,  loans  are  not  any  more 
provisioned  for  the  entire  amount  at  the  time  of  the  decision  but  based  on  the 
outstanding amount at the end of a year. The provisioning amount is calculated at the 
beginning of the year "n" as the difference between the target amount and the Fund's 
net assets at the end of the year "n-1". This provisioning amount is introduced in the 
year  "n"  to  the  "n+1"  preliminary  budget  and  effectively  paid  in  one  transaction  at 
the  beginning  of  the  year  "n+1"  from  "the  provisioning  of  the  Guarantee  Fund" 
(budget line 01 04 01 14). 

EN 

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As a result, 9% (maximum of EUR 45 million) of the effectively disbursed amount 
will be considered in the target amount at the end of the year "n-1" for the calculation 
of the provisioning of the Fund.  

01  04  01  04  –  EC  guarantee  for  Community  loans  raised  for  macro-financial 
assistance to third countries.  

The  budget  entry  ("p.m.")  reflecting  the  budget  guarantee  for  the  loan  (EUR  500 
million) will be activated only in the case of an effective call on the guarantee. It is 
not expected that the budget guarantee be called. 

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4. 

SUMMARY OF RESOURCES 

4.1. 

Financial Resources 

4.1.1. 

Summary of commitment appropriations (CA) and payment appropriations (PA) 

EUR million (to 3 decimal places) 

Expenditure type 

Section 
no. 

Operational expenditure8 

Commitment Appropriations 
(CA) 

8.1. 

Payment 
(PA) 

Appropriations 

a 

b 

2009 

2010 

Total 

0 

0 

0 

0 

Administrative expenditure within reference amount9 

Technical  &  administrative 
assistance (NDA) 

8.2.4. 

c 

0 

0 

TOTAL REFERENCE AMOUNT 

Commitment 
Appropriations 

Payment Appropriations 

a+c 

b+c 

0 

0 

0 

0 

Administrative expenditure not included in reference amount10 

Human 
associated 
(NDA) 

resources 

and 
expenditure 

8.2.5. 

d 

Administrative  costs,  other 
than  human  resources  and 
not 
associated 
included 
reference 
in 
amount (NDA) 

costs, 

8.2.6. 

e 

Total indicative financial cost of intervention 

TOTAL  CA  including  cost 
of Human Resources 

TOTAL  PA  including  cost 
of Human Resources 

a+c
+d+
e 

b+c
+d+
e 

0 

0 

0 

0 

0 

0 

0 

0 

4.1.2.  Compatibility with Financial Programming 

X 

Proposal is compatible with existing financial programming. 

8 
9 
10 

Expenditure that does not fall under Chapter xx 01 of the Title xx concerned. 
Expenditure within article xx 01 04 of Title xx. 
Expenditure within chapter xx 01 other than articles xx 01 04 or xx 01 05. 

EN 

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(cid:133) 

(cid:133) 

Proposal  will  entail  reprogramming  of  the  relevant  heading  in  the  financial 
perspective. 

Proposal  may  require  application  of  the  provisions  of  the  Inter-institutional 
Agreement11 (i.e. flexibility instrument or revision of the financial perspective). 

4.1.3.  Financial impact on Revenue 

X 

Proposal has no financial implications on revenue 

(cid:133) 

Proposal has financial impact – the effect on revenue is as follows: 

4.2. 

Human Resources FTE (including officials, temporary and external staff) – see 
detail under point 8.2.1. 

Annual requirements 

Total  number  of  human 
resources 

2009 

2010 

1/3

1/3  

5. 

CHARACTERISTICS AND OBJECTIVES 

5.1. 

Needs to be met in the short or long term 

The Ukraine's economy has been severely hit by the global economic and financial 
crisis. Economic growth started to decelerate in the second half of 2008 and output is 
expected  to  contract  by  14%  in  2009.  Although  the  current  account  deficit  is 
declining, overall external financing needs remain high due to an increase in short-
term debt repayment obligations. For the year 2009 alone the International Monetary 
Fund  identified  a  residual  external  financing  gap  amounting  to  USD  2.8  billion. 
Somewhat lower but still substantial external financing needs are expected for 2010. 
The  European  Community  is  expected  to  cover  a  part  of  these  residual  external 
financing needs. 

5.2. 

Value-added  of  Community  involvement  and  coherence  of  the  proposal  with 
other financial instruments and possible synergy 

The  Community  financial  support  reflects  the  Ukraine's  strategic  importance  in  the 
European  Neighbourhood  Policy.  Macro-financial  assistance  is  an  appropriate 
instrument  to  complement  the  existing  Community  assistance  and  contributes  to  a 
fully financed IMF-supported economic stabilisation programme. Thereby, important 
synergies  can  be  established  with  respect  to  its  impact  on  economic  reform  and 
stabilisation.  

11 

See points 19 and 24 of the Interinstitutional agreement. 

EN 

15 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
5.3. 

Objectives, expected results and related indicators of the proposal in the context 
of the ABM framework 

Within  the  Activity  "International  Economic  and  Financial  Affairs"  of  the 
Directorate General for Economic and Financial Affairs, the Objective of "providing 
macro-financial  assistance  to  third  countries  in  resolving  their  balance  of  payment 
crises and restoring external debt sustainability" is related to the general objective "to 
promote prosperity beyond the EU". 

The  related  indicators  are  "current  account  balance  as  a  percentage  of  GDP" 
(expected  result:  improvement),  "external  debt  as  a  percentage  of  GDP"  (expected 
result: decrease) and "official reserves in months of imports of goods and services" 
(expected result: a stabilisation or an increase). 

5.4.  Method of Implementation (indicative) 

X 

Centralised Management 

X 

directly by the Commission 

(cid:133) 

indirectly by delegation to: 

(cid:133) 

executive Agencies 

(cid:133) 

bodies set up by the Communities as referred to in art. 185 of the 
Financial Regulation 

(cid:133) 

national public-sector bodies/bodies with public-service mission 

(cid:133) 

Shared or decentralised management 

(cid:133)  with Member states 

(cid:133)  with Third countries 

(cid:133) 

Joint management with international organisations (please specify) 

Relevant comments: 

EN 

16 

  EN 

6. 

MONITORING AND EVALUATION 

6.1.  Monitoring system 

The monitoring of the action by the Commission services will take place on the basis 
of  macroeconomic  and  structural  policy  measures  to  be  agreed  with  the  Ukrainian 
authorities in a Memorandum of Understanding. The authorities will be required to 
report  on  those  measures  to  the  Commission  services  on  a  regular  basis.  The 
Delegation  of  the  European  Commission  in  Kyiv  will  also  provide  reporting  on 
issues  relevant  for  the  monitoring  of  the  assistance.  The  Commission  services  will 
remain  in  close  contact  with  the  IMF  and  the  World  Bank  to  benefit  from  their 
expertise. 

6.2. 

Evaluation 

6.2.1.  Ex-ante evaluation 

An  ex–ante  evaluation  was  carried  out  by  Commission  services  (Unit  D3  of  the 
Economic and Financial Affairs Directorate-General). 

6.2.2.  Measures taken following an intermediate/ex-post evaluation (lessons  learned from 

similar experiences in the past) 

Since  2004  a  total  of  nine  ex-post  evaluations  have  been  carried  out  on  macro-
financial  assistance  operations,  including  two  in  the  new  independent  states  of  the 
former  Soviet  Union  (Armenia,  Tajikistan).  These  evaluations  conclude  that  MFA 
operations  do  contribute,  albeit  sometimes  modestly  and  indirectly,  to  the 
improvement  of  the  external  sustainability,  the  macroeconomic  stability  and  the 
achievement  of  structural  reforms  in  the  recipient  country.  In  most  cases,  MFA 
operation had a positive effect on the balance of payments of the beneficiary country 
and  helped  to  relax  their  budgetary  constraints.  They  also  led  to  a  slightly  higher 
economic growth. 

6.2.3.  Terms and frequency of future evaluation 

An  independent  ex-post  evaluation  of  the  assistance  to  Ukraine  is  planned  to  be 
carried out under the multi-annual evaluation programme of the Directorate-General 
for Economic and Financial Affairs. 

7. 

ANTI-FRAUD MEASURES  

The Commission services have put in place an on-going programme of Operational 
Assessments  of  the  financial  circuits  and  administrative  procedures  in  all  third 
countries benefiting from the Community macro-financial assistance in order to fulfil 
requirements  of  the  Financial  Regulation  applicable  to  the  General  Budget  of  the 
European Communities. 

In  Ukraine,  no  Operational  Assessment  has  yet  taken  place  but  a  World  Bank's 
Public Financial Management Performance study was published in March 2007. The 
first  Operational  Assessment  will  be  commissioned  by  the  European  Commission 

EN 

17 

  EN 

shortly. Its results will be used to guide the definition of the specific policy measures 
to be attached to the release of the assistance with a view of strengthening efficiency, 
transparency and accountability of public finance management systems in Ukraine. 

The  proposed  legal  basis  for  macro-financial  assistance  to  Ukraine  includes  a 
provision on fraud prevention measures. These measures will be elaborated further in 
a  Memorandum  of  Understanding  and  the  loan  agreement.  It  is  envisaged  that  a 
number of specific policy conditions will be attached to the assistance mainly in the 
field  of  public  finance  management,  with  a  view  of  strengthening  efficiency, 
transparency and accountability of the assistance. The macro-financial assistance will 
be liable to verification, control and auditing procedures under the responsibility of 
the  Commission,  including  the  European  Antifraud  Office  (OLAF),  and  by  the 
European Court of Auditors. 

EN 

18 

  EN 

8. 

DETAILS OF RESOURCES 

8.1. 

Objectives of the proposal in terms of their financial cost 

Commitment appropriations in EUR million (to 3 decimal places) 

Type of output 

Av. 
cost 

Year 2009 

Year 2010 

Year 2011 

Year 2012 

Year n+4 

Year n+5 and 
later 

TOTAL 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

of 

(Headings 
Objectives, 
and 
actions 
outputs should be 
provided) 

OPERATIONAL 
OBJECTIVE No.1  

Action  1  Balance 
of 
payments/ 
budget support to 
Ukraine 

- Output 1  Guarantee Fund 

0 

 0 

0 

provisioning 

- Output 2 

Action 
Operational 
Assessment. 

2 

- Output 1  Report 

1 

Sub-total 
Objective 1 

OPERATIONAL 
OBJECTIVE  No.2 
1……… 

0.05 

0.05 

45.0 

45.0 

EN 

19 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Action 
1………………. 

- Output 1 

Sub-total 
Objective 2 

OPERATIONAL 
OBJECTIVE  No.n 
1 

Sub-total 
Objective n 

TOTAL COST 

0.05 

45.0 

EN 

20 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8.2. 

Administrative Expenditure  

8.2.1.  Number and type of human resources 

Types of post 

Staff to be assigned to management of the action using existing and/or 
additional resources (number of posts/FTEs) 

Year 2009  Year n+1  Year n+2  Year n+3  Year n+4  Year n+5 

Officials or 
temporary 
staff12 (XX 01 
01) 

A*/AD 

1/3  1/3 

B*, 
C*/AST 

Staff  financed13  by  art. 
XX 01 02 

Other  staff14  financed by 
art. XX 01 04/05 

TOTAL 

1/3  1/3 

8.2.2.  Description of tasks deriving from the action 

Inter alia prepare/negotiate memoranda of understanding and loan agreement, liaise 
with  the  authorities  and  the  International  Financial  Institutions,  monitor  economic 
and  structural  policies  of  the  beneficiary  country,  conduct  review  missions  and 
prepare  Commission  staff  reports,  prepare  Commission  procedures  related  to  the 
management of the assistance.  

8.2.3. 

Sources of human resources (statutory) 

X 

(cid:133) 

(cid:133) 

(cid:133) 

(cid:133) 

Posts currently allocated to the management of the programme to be replaced 
or extended 

Posts pre-allocated within the APS/PDB exercise for year n 

Posts to be requested in the next APS/PDB procedure 

Posts  to  be  redeployed  using  existing  resources  within  the  managing  service 
(internal redeployment) 

Posts required for year n although not foreseen in the APS/PDB exercise of the 
year in question 

12 
13 
14 

Cost of which is NOT covered by the reference amount 
Cost of which is NOT covered by the reference amount 
Cost of which is included within the reference amount 

EN 

21 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
8.2.4.  Other  Administrative  expenditure  included  in  reference  amount  (XX  01  04/05  – 

Expenditure on administrative management) 

EUR million (to 3 decimal places) 

Budget line 01 03 02 

Macro-economic assistance 

Year 
n 

Year 
n+1 

Year 
n+2 

Year 
n+3 

Year 
n+4 

Year 
n+5  

and 
later 

TOTAL 

Technical 

1 
and 
assistance (including related staff costs) 

administrative 

Executive agencies15 

Other 

technical 

and 

administrative 

assistance 

- intra muros  

- extra muros 

1) Operational assessment  

0.050 

2) Ex-post evaluation  

0.250 

Total  Technical  and  administrative 
assistance 

0.050 

0.250 

8.2.5.  Financial cost of human resources and associated costs not included in the reference 

amount 

Type of human resources 

Year n 

Year n+1  Year n+2  Year n+3  Year n+4  Year n+5 

EUR million (to 3 decimal places) 

15 

Reference should be made to the specific legislative financial statement for the Executive Agency(ies) 
concerned. 

EN 

22 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
and later 

Officials  and  temporary  staff 
(XX 01 01) 

0.030 

0.030 

Staff  financed  by  Art  XX  01 
02  (auxiliary,  END,  contract 
staff, etc.) 

(specify budget line) 

cost 

Total 
of  Human 
Resources  and  associated 
in  reference 
costs 
amount) 

(NOT 

0.030 

0.030 

Calculation– Officials and Temporary agents 

Reference should be made to Point 8.2.1, if applicable 

NOT APPLICABLE 

Calculation– Staff financed under art. XX 01 02 

Reference should be made to Point 8.2.1, if applicable 

NOT APPLICABLE 

8.2.6. Other administrative expenditure not included in reference amount 

EUR million (to 3 decimal places)

Year 
2009 

Year 
n+1 

Year 
n+2 

Year 
n+3 

Year 
n+4 

XX 01 02 11 01 – Missions 

0.020 

0.010 

XX 01 02 11 02 – Meetings & Conferences 

XX 01 02 11 03 – Committees16  

XX 01 02 11 04 – Studies & consultations 

Year 
n+5 

and 
later 

TOTAL 

0.030 

16 

Specify the type of committee and the group to which it belongs. 

EN 

23 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
XX 01 02 11 05 - Information systems 

2 

Total 

Other  Management 

Expenditure (XX 01 02 11) 

3  Other 

expenditure 

administrative 
including reference to budget line) 

nature 

of 

an 
(specify 

expenditure, 
than  human  resources  and 
in 

Total  Administrative 
other 
associated  costs  (NOT 
reference amount) 

included 

0.020 

0.010 

0.030 

Calculation - Other administrative expenditure not included in reference amount 

Three staff missions for one/two persons 

EN 

24 

   EN