COMMISSION STAFF WORKING DOCUMENT Background Analysis per beneficiary country Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of macro-financial assistance to third countries in 2017
Date: 2018-06-29
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU aid, economic stabilisation, financial aid, macroeconomics, third country

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 29.6.2018  SWD(2018) 361 final  COMMISSION STAFF WORKING DOCUMENT Background Analysis per beneficiary country Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of macro-financial assistance to third countries in 2017 {COM(2018) 511 final}  
 
 
LIST OF ABBREVIATIONS 

AA 

CIS 

CPI 

Association Agreement 

Commonwealth of Independent States 

Consumer price index 

DCFTA 

Deep and Comprehensive Free Trade Area 

EC 

ECF 

EEU 

EFF 

EFTA 

EIB 

ENP 

ENI 

EU 

EUR 

FATF 

FDI 

FSAP 

European Community 

Extended Credit Facility 

Eurasia Economic Union 

Extended Fund Facility 

European Free Trade Association 

European Investment Bank 

European neighbourhood policy 

European neighbourhood instrument 

European Union 

Euro 

Financial Action Task Force 

Foreign direct investment 

Financial sector assessment programme 

GAFTA 

Greater Arabic Free Trade Area 

GCC 

GDP 

IMF 

MFA 

MoU 

OECD 

OJ 

PFM 

PPP 

SBA 

SDR 

SOE 

SREP 

USD 

TFEU 

VAT 

WTO 

y-o-y 

Gulf Cooperation Council 

Gross domestic product 

International Monetary Fund 

Macro-financial assistance 

Memorandum of understanding 

Organisation for Economic Cooperation and Development 

Official Journal of the European Union 

Public finance management 

Public-private partnership 

Stand-By Arrangement 

Special drawing rights 

State-owned enterprise 

Supervisory review and evaluation process 

United States dollar 

Treaty on the Functioning of the European Union 

Value added tax 

World Trade Organisation 

year-on-year 

1 

 
CONTENTS 

INTRODUCTION ......................................................................................................................... 3 

BACKGROUND ANALYSIS OF BENEFICIARIES OF MACRO-FINANCIAL 
ASSISTANCE  ............................................................................................................................... 4 

1.  GEORGIA.............................................................................................................................. 4 

1.1.  MACROECONOMIC PERFORMANCE .................................................................................. 4 
STRUCTURAL REFORMS ................................................................................................... 5 
1.2. 
IMPLEMENTATION OF MACRO-FINANCIAL ASSISTANCE .................................................. 6 
1.3. 

2. 

JORDAN ................................................................................................................................ 8 

2.1.  MACROECONOMIC PERFORMANCE .................................................................................. 8 
STRUCTURAL REFORMS ................................................................................................... 9 
2.2. 
IMPLEMENTATION OF MACRO-FINANCIAL ASSISTANCE ................................................ 10 
2.3. 

3.  MOLDOVA.......................................................................................................................... 12 

3.1.  MACROECONOMIC PERFORMANCE ................................................................................ 12 
STRUCTURAL REFORMS ................................................................................................. 13 
3.2. 
IMPLEMENTATION OF MACRO-FINANCIAL ASSISTANCE ................................................ 14 
3.3. 

4.  TUNISIA .............................................................................................................................. 17 

4.1.  MACROECONOMIC PERFORMANCE ................................................................................ 17 
STRUCTURAL REFORMS ................................................................................................. 18 
4.2. 
IMPLEMENTATION OF MACRO-FINANCIAL ASSISTANCE ................................................ 19 
4.3. 

5.  UKRAINE ............................................................................................................................ 22 

5.1.  MACROECONOMIC PERFORMANCE ................................................................................ 22 
STRUCTURAL REFORMS ................................................................................................. 24 
5.2. 
IMPLEMENTATION OF MACRO-FINANCIAL ASSISTANCE ................................................ 25 
5.3. 

ANNEXES .................................................................................................................................... 27 

ANNEX 1: SELECTED MACROECONOMIC INDICATORS BY COUNTRY ......................................... 27 
ANNEX 2: MFA OPERATIONS BY DATE OF DECISION, 1990-2017 ............................................. 29 
ANNEX 2A: STATUS OF EFFECTIVE DISBURSEMENTS BY DATE OF DECISION AT END-DECEMBER 
2017 ........................................................................................................................................... 30 
ANNEX 2B: STATUS OF EFFECTIVE DISBURSEMENTS BY REGION AT END-DECEMBER 2017 ..... 36 
ANNEX 3: MFA AMOUNTS AUTHORISED BY YEAR, 2005-2017 (EUR MILLION) ....................... 42 
ANNEX 4: MFA AMOUNTS DISBURSED BY YEAR, 2005-2017 (EUR MILLION) ......................... 43 

2 

 
INTRODUCTION 

This  staff  working  document  complements  the  Commission’s  report  to  the  European 
Parliament and the Council on the implementation of macro-financial assistance (MFA) 
to third countries in 2017. 

Over  2017,  five  countries  benefited  from  macro-financial  assistance,  notably  Georgia, 
Moldova  and  Ukraine  in  the  Eastern  Neighbourhood,  and  Jordan  and  Tunisia  in  the 
Southern  Neighbourhood.  For  each  beneficiary  country,  the  report  provides  more 
detailed information on: (i) their macroeconomic and financial situation; (ii) progress in 
accomplishing  their  structural  reforms  agenda;  and  (iii)  implementation  of  MFA 
operations in those countries. 

The annexes include overview tables on the effective disbursements of MFA operations 
since 1990 by date of adoption of the decisions and by region, as well as tables on MFA 
commitment and payment amounts in 2005-2017, by year and by region. 

3 

 
 
 
BACKGROUND ANALYSIS OF BENEFICIARIES OF MACRO-FINANCIAL ASSISTANCE 

1 

1. 

GEORGIA 

1.1. Macroeconomic performance 

The  macroeconomic  outlook  for  Georgia  remains  vulnerable.  The  economy  faces  risks 
due  to  external  imbalances  (notably,  a  large  current  account  deficit  and  significant 
external debt) and international reserves that are below the adequate level. 

Georgia’s GDP increased by 4.8 % between January and November 2017 and is expected 
to  have  grown  by  more  than  4 %  for  the  whole  of  2017,  driven  by  a  recovery  in  both 
external and domestic demand and by an increase in investment. A similar level of GDP 
growth is forecast for 2018. Last year’s faster-than-expected economic growth follows 2 
years  of  deceleration  due  to  external  shocks,  notably  the  economic  slowdown  in  the 
region. 

Over-performance  on  the  back  of  faster-than-expected  economic  growth  is  expected  to 
have  allowed  a  reduction  of  the  general  government  fiscal  deficit  to  3.5 %  of  GDP  in 
2017, compared to  4.1 % in  2016. The deficit  is forecast  to slightly  decrease further  in 
2018.  Georgia’s  public  debt  is  expected  to  have  decreased  in  2017,  to  around  42 %  of 
GDP (compared to 45 % in 2016) and is likely to remain at a similar level in 2018. 

Annual consumer price inflation has been above the central bank’s target of 4 % for most 
of this year, following an increase in excise duties on tobacco, fuel and motor vehicles in 
January 2017. To ease inflationary pressures, the central bank raised its refinancing rate 
three  times  in  2017  from  6.5 %  to:  6.75 %  in  January,  7 %  in  May  and  7.25 %  in 
December. 

On the exchange rate of the lari against the US dollar, the Georgian currency depreciated 
by 22 % in 2014-2016, moving from 1.77 in 2014 to 2.27 in 2016. In 2017, the lari was 
broadly stable against the US dollar. However, the overall trend belies substantial intra-
annual  volatility:  the  lari  appreciated  against  the  dollar  by  around  12 %  from  the 
beginning  of  2017  until  mid-August  and  lost  this  gain  in  the  following  4  months.  This 
exchange  rate  volatility,  coupled  with  the  still  high  dollarisation  (68 %  of  deposits  and 
58 % of loans were denominated in US dollars as of November 2017), makes Georgia’s 
financial sector vulnerable to exchange rate risk. 

Georgia’s balance of payment position remains vulnerable due to a large current account 
deficit  (around  10 %  expected  in  both  2017  and  2018)  and  high  external  debt  (107 % 
expected  in  2017  and  106 %  in  2018).  The  inflows  of  foreign  direct  investment  (FDI) 
were lower than expected in 2017 (around 9 % of GDP) due to the fact that some large 
investment  projects  are  nearing  completion.  Georgia’s  international  reserves  have  been 
broadly stable in absolute terms since 2011, totalling USD 3.0 billion at end-2017 (about 
3  months  of  import  cover),  but  reserve  needs  have  been  increasing  and  are  currently 
below the level the IMF estimates is adequate. 

1 This section quotes statistics supplied by national authorities and other relevant sources. 

4 

 
 
 
                                                            
1.2. Structural reforms 

Key to Georgia’s structural reform agenda is the government’s Four-Point Reform Plan 
which  focuses  on 
the  business  environment,  education  and  public 
administration and boosting investment in infrastructure. The Georgian authorities intend 
to  complement  these  structural  reforms  with  fiscal  reforms  and  a  strengthening  of  the 
financial sector. 

improving 

The  first  leg  of  the  Reform  Plan  is  to  improve  the  business  environment.  For  this,  the 
Georgian authorities plan to reform the insolvency law, ensure an adequate restructuring 
framework  for  viable  businesses  and  introduce  International  Financial  Reporting 
Standards (IFRS)  for financial  reporting by corporations. The Georgian authorities also 
plan  to  continue  the  land  reform  by  extending  the  application  of  a  special  rule  which 
simplifies  the  land  registration  process.  By  simplifying  land  transactions  and  making  it 
easier to use land as collateral for borrowing, the land reform should contribute to rural 
development and make agricultural production more efficient. 

The second leg of the Reform Plan is educational reform. The Georgian authorities plan 
to  improve  the  education  system  by  setting  curriculum  standards  and  introducing 
vocational  training  and  adult  learning.  This  reform  should  help  to  address  the  skills 
mismatch, which is one of the main structural weaknesses of the Georgian economy and 
contributes to high unemployment.  

The  third  leg  of  the  Reform  Plan  is  to  make  public  administration  more  efficient.  This 
will  notably  involve  containing  the  wage  bill  and  administrative  expenses,  better 
targeting subsidies and social assistance programmes and introducing a one-stop shop for 
all  government  services.  These  changes  are  expected  to  further  improve  the  business 
environment  (in  addition  to  the  measures  under  the  dedicated  first  point  of  the  reform 
plan) and create fiscal space for investment. 

The fourth leg of the Reform Plan covers investment in infrastructure (highways, ports, 
airports  and  railways).  Additional  and  better  infrastructure  is  expected  to  help  Georgia 
utilise  its  potential  as  a  transit  country  between  Europe  and  Asia,  support  the 
development  of  the  growing  tourism  sector  and  in  this  way  create  new  economic 
opportunities for its population. 

The  Georgian  authorities  intend  to  complement  structural  reforms  with  fiscal  reforms. 
Aside from reorienting expenditure under the Four-Point Reform Plan (reducing current 
expenditure and increasing capital expenditure), the Georgian authorities plan to improve 
the  management  of  fiscal  risks  stemming  from  public-private  partnerships  (PPPs)  and 
state-owned enterprises (SOEs). The Parliament of Georgia is expected to adopt a law in 
2018  on  PPPs,  which  will  establish  reporting  and  monitoring  government  exposure  in 
PPPs  and  cap  such  government  exposure.  For  SOEs,  the  Georgian  authorities  have 
expanded the analysis of contingent liabilities associated with such enterprises, as part of 
the Fiscal Risk Statement accompanying the 2018 budget. The Georgian authorities also 
plan  to  tighten  budget  lending,  e.g.  to  SOEs,  by  requiring  a  reasonable  expectation  of 
commercial returns on new operations. 

In  the  financial  sector,  the  Georgian  authorities  plan  to  introduce  a  deposit  guarantee 
scheme  in  2018  and  to  improve  regulatory,  supervisory  and  resolution  frameworks  for 
banks.  In  April  2017,  the  Georgian  Parliament  approved  legislative  amendments  that 
invalidate the effects of a 2014 law establishing a new financial supervision agency. In 
this  way,  the  Georgian  authorities  have  reaffirmed  the  independence  of  the  National 
Bank of Georgia, reverting to the original legal framework in which the responsibility for 
financial  supervision  is  assigned  to  the  Bank,  as  recommended  by  the  international 
financial institutions and the EU. 

5 

 
The  issue  of  high  dollarisation  continues  to  be  addressed  by  introducing  liquidity 
coverage ratio limits, with preferential treatment of liabilities denominated in the national 
currency. On the supply side, the Georgian authorities also plan to develop the country’s 
capital  markets  in  lari,  notably  by  starting  to  publish  the  calendar  of  government  bond 
issuances to develop a benchmark, upgrading the trading infrastructure of the Georgian 
Stock  Exchange  and  introducing  derivatives.  On  the  demand  side,  the  Georgian 
authorities  introduced  a  second  (funded)  pillar  of  the  pension  system  with  effect  from 
January  2018,  which  is  also  intended  to  create  demand  for  long-term  financial 
instruments  denominated  in  the  national  currency.  In  addition,  the  Georgian  authorities 
plan  to  introduce  mandatory  third-party  vehicle  insurance  in  2018  to  support  the 
development of the insurance sector. 

The national reform agenda is also supported by MFA conditionality. For example, the 
conditions  for  the  2015-2017  MFA  operation  helped  to  improve  public  finance 
management  in  Georgia  by  protecting  the  operational  independence  of  the  State  Audit 
Office.  The  proposed  further  MFA  is  likely  to  be  conditional  on  making  further 
improvements  in  public  finance  management,  the  financial  sector,  social  and  labour 
market policies, the business environment, trade and the promotion of exports. 

1.3. Implementation of macro-financial assistance 

The  first  and  second  MFA  operations  for  Georgia  were  pledged  at  the  International 
Donors’  Conference  in  Brussels  in  October  2008,  following  Georgia’s military  conflict 
with Russia in August 2008. The first operation of EUR 46 million, fully in the form of 
grants, was implemented in 2009-2010. 

The  second  operation  of  EUR  46  million,  half  in  grants  and  half  in  loans,  was 
implemented  in  2015-2017.  In  2016,  Georgia  met  all  policy  conditions  attached  to  the 
2015-2017 MFA operation (i.e. strengthen public finance management, the social safety 
net,  the  financial  sector,  as  well  as  trade  and  competition  policies).  However,  the  final 
disbursement  could  only  be  made  in  May  2017,  once  the  new  IMF  programme  (2017-
2020) had been agreed in April 2017. 

In  June  2017,  Georgia  requested  further  MFA  from  the  EU.  In  September  2017,  the 
Commission submitted to the European Parliament and the Council a proposal for up to 
EUR  45  million  in  further  MFA  (EUR  35  million  in  the  form  of  loans  and  EUR  10 
million  in  the  form  of  grants).  The  European  Parliament  and  the  Council  adopted  the 
Decision  in  April  2018.  If  all  relevant  measures  are  fulfilled,  the  assistance  to  Georgia 
could be disbursed in two instalments in 2018.  

The proposed new MFA operation will help Georgia cover part of the residual external 
financing needs for 2017-2020 and in so doing reduce the economy’s short-term balance 
of payments and fiscal vulnerabilities. As previously noted, the new MFA operation will 
also  support  Georgia’s  national  reform  agenda  by  making  the  MFA  conditional  on  the 
implementation of certain policies. 

6 

 
 
 
 
 
 
STATUS OF ECONOMIC REFORM — GEORGIA 

1. Price liberalisation 

Prices are largely free. 

2. Trade regime 

Georgia  (WTO  member  since  2000)  has  a  liberal  trade  policy,  with  no  quantitative 
restrictions on imports or exports. In June 2014, it  signed an Association Agreement with 
the  EU,  including  a  deep  and  comprehensive  free  trade  area  (DCFTA)  agreement,  which 
entered into force in September 2014. 

3. Exchange rate regime 

There  is  a  floating  exchange  rate  for  the  lari,  with  limited  official  intervention  by  the 
National Bank of Georgia. There are no restrictions on current international transactions, in 
accordance with Article VIII of the IMF’s Articles of Agreement. 

4. Foreign direct investment 

Georgia has a liberal regime for FDI and unlimited repatriation of capital and profits. FDI 
has  increased  substantially  in  the  past  few  years,  from  5.1 %  of  GDP  in  2013  to  an 
estimated 9 % of GDP in 2017. 

5. Monetary policy 

The Central Bank’s main monetary policy objective is price stability. The Bank is currently 
applying an inflation-targeting regime, with a target of 4 % for 2017. The effectiveness of 
monetary policy is significantly constrained by the high level of dollarisation: in November 
2017, 58 % of loans and 68 % of deposits were denominated in US dollars. 

6. Public finances and taxation 

The  public  finance  management  system  is  essentially  sound  and  transparent,  although 
further reforms are needed in areas such as public investment management. Public revenues 
are constrained by the Constitution (Article 94), while the budget deficit, public debt and 
public spending are capped by the Liberty Act, in force since January 2014, at 3 %, 60 % 
and 30 % of GDP respectively. 

7. Privatisation and enterprise restructuring 

Most state-owned enterprises (SOEs) have been privatised, with their number falling from 
around 1 300 in 2009 to around 140 in 2017. The remaining SOEs account for around 7 % 
of  GDP  by  revenue  and  expenditure,  and  17 %  of  GDP  by  liabilities.  The  ongoing 
privatisations mainly concern loss-making SOEs. 

8. Financial sector 

Georgia’s financial sector is small and dominated by banks, which hold more than 90 % of 
the  total  financial  sector  assets.  However,  banking  sector  credit  to  the  economy  is  only 
around 50 % of GDP. The sector is concentrated, with the two largest banks, out of 16 in 
total,  holding  around  two  thirds  of  the  assets.  Georgia’s  banking  sector  has  a  low-risk 
profile  and  has  generally  remained  resilient,  reporting  sufficient  capital  and  liquidity.  In 
November 2017, the liquidity coverage ratio was 136 % (compared to 119 % in 2016), and 
the capital adequacy ratio was around 15.4 % (in line with the average level in 2014-2016). 

7 

 
2. 

JORDAN 

1.4. Macroeconomic performance 

The  continuation  of  the  Syrian  crisis  in  2017,  through  its  effects  on  trade,  tourism  and 
investor  confidence,  put  a  drag  on  growth  and  weighed  on  Jordan’s  external  and  fiscal 
position. GDP increased modestly by 2.2 % in 2017 compared to a 2 % increase in 2016. 
However, it remains insufficient to contain unemployment, which grew from 15.3 % in 
2016 and 18.2 %2 in the first quarter of 2017 to 18.5 % in the third quarter of 2017. 

Headline  consumer  price  inflation  rose  to  3.3 %  year-on-year  in  the  first  8  months  of 
2017.  This  reflected  higher  global  food  prices  and  the  one-off  impact  of  the  fiscal 
measures that the authorities took in early 2017 accounting for 1.5 % of GDP (increases 
in excise tax and in goods and services tax). 

The  progress  with  fiscal  consolidation  in  recent  years,  though  partly  owing  to  low  oil 
prices, continued in 2017. The overall fiscal deficit, which includes transfers to NEPCO 
(the  electricity  company)  and  WAJ  (the  water  authority  of  Jordan)  and  grants,  shrank 
from 3.2 % of GDP in 2016 to 2.6 % of GDP in 2017. This outcome was supported by 
the  fiscal  measures  of  1.5 %  of  GDP  mentioned  above.  Despite  the  progress,  the  fiscal 
position remains dependent on foreign grants. These amounted to 2.9 % of GDP in 2017, 
down  from  3.3 %  of  GDP  in  2015.  Jordan’s  gross  public  debt  increased  to  95.3 %  of 
GDP at the end of 2017 from 95.1 % of GDP at the end of 2016. Around 40.7 % of GDP 
was external public debt. 

On  the  back  of  improved  travel  receipts  and  remittance  inflows,  the  current  account 
deficit narrowed slightly in 2017 to 8.4 % of GDP from 9.7 % of GDP in 2016. However, 
it  remains  at  high  levels  and  is  dependent  on  foreign  grants  (11.7 %  of  GDP  in  2017 
excluding grants), which indicates the vulnerability of the external position. 

During 2017, the Central Bank of Jordan increased the re-discount rate in four steps to 
reach 5 % in December 2017. The Bank had left the rate unchanged at 3.75 % since July 
2015.  This  decision  to  raise  the  rate  was  motivated  by  the  jump  in  inflation  (to  3.8 % 
year-on-year between January and March 2017), the decision of the US Federal Reserve 
to increase benchmark rates from 0.75 % in March 2017 to 1.5 % in December 2017 (in 
three steps) and the 10.8 % fall in Jordan’s foreign currency reserves between December 
2016 and April 2017. 

In December 2017, gross foreign currency reserves (including gold) stood at USD 14.3 
billion, equivalent to around 7.9 months of next year’s imports. Given the vulnerability 
of the external position, the elevated risks from regional conflicts, the exchange rate peg 
and  exposure  to  oil  price  shocks,  the  current  level  of  reserves  should  be  preserved  or 
increased  to  help  the  country  withstand  possible  shocks  stemming  from  the  factors 
mentioned above. 

2   This  figure  reflects  a  new  methodology  used  by  the  Jordanian  Department  of  Statistics  (DoS)  for 
measuring unemployment following recommendations by the International Labour Organisation (ILO). 
Therefore, it may not be fully comparable to the figures cited for 2016 and earlier years. 

8 

 
 
 
 
                                                            
1.5. Structural reforms 

The authorities continued to implement an ambitious structural reform agenda to correct 
macroeconomic  imbalances  and  generate  more  inclusive  and  sustainable  growth.  The 
reform  agenda  draws  mainly  from  ‘Jordan  2025’  —  a  10-year  economic  blueprint 
published  in  May  2015  —  and  from  programmes  agreed  with  international  donors  (in 
particular, the IMF and the  World Bank) and the EU (in the context of the Partnership 
Priorities and the Jordan Compact agreed in July 2016 and which include the MFA-II). 

In  May  2017,  the  authorities  announced  the  Jordan  economic  growth  plan,  which 
comprises  a  comprehensive  set  of  reforms  and  investment  projects  to  preserve 
macroeconomic stability and revitalise growth. They also announced the adoption of the 
national  strategy  for  human  resources  development,  which  outlines  a  10-year  plan  to 
improve  elementary  education,  higher  education,  technical  education  and  vocational 
training. 

Fiscal consolidation was underpinned by the fiscal measures of 1.5 % of GDP (increases 
in excise tax and in goods and services tax) mentioned above. 

For MFA-II induced structural reforms, in June 2017 the authorities adopted an updated 
version  of  their  medium-term  public  debt  strategy,  re-organised  the  Public  Debt 
Directorate and took measures to increase transparency and publish trade information on 
public debt management to help develop a domestic bond market. 

The  government  also  adopted  and  published  an  updated  action  plan  for  reducing  water 
sector  losses  and  awarded  contracts  for  projects  that  improve  energy  efficiency  in  the 
water sector.   

Also in June 2017, the government completed the withdrawal of the Audit Bureau from 
an  additional  20  internal  control  units.  These  units  are  now  ready  and  certified  by  the 
Audit Bureau to handle pre-audit independently without the Audit Bureau’s involvement. 

Substantial  progress  was  achieved  in  establishing  an  operational  National  Unified 
Registry, with the signature in 2017 of the related contract which would allow the project 
(financed by the Deauville Partnership’s Transition Fund) to be completed by end-2018. 

The authorities launched a new household expenditure and income survey as part of their 
efforts  to  produce  updated  poverty  indicators  (for  the  first  time  since  2010)  that  will 
allow them to improve the targeting of social policies. 

There  was  visible  progress  in  making  it  easier  to  hire  Syrian  refugees.  The  authorities 
issued  36 790  work  permits  in  2016  and  36 125  work  permits  in  2017.  At  the  end  of 
2017,  there  were  233  Syrian  refugees  employed  in  the  industrial  zones  under  the 
agreement to relax the rules of origin. This was out of the total workforce of 697 persons 
working in the 10 factories granted a licence to export to the EU under this scheme. Until 
the end of 2017, two of the companies participating in the scheme exported products to 
the EU worth a total of EUR 1.6 million. Syrian refugees also gained access to vocational 
training programmes of the Jordanian Ministry of Labour. 

Unfortunately, by the end of 2017, little or no progress was identified in: i) amending the 
Audit Bureau Law to make the Bureau more independent; ii) submitting to the Jordanian 
Parliament a new more progressive Income Tax Law with a lower exemption threshold; 
iii)  reducing  tax  exemptions  in  the  general  sales  tax  (GST);  and  iv)  establishing  an 
independent system for appeals in the case of public procurement. 

9 

 
 
1.6. Implementation of macro-financial assistance 

As  regional  instability  deepened,  with  negative  repercussions  for  the  economy,  the 
Jordanian authorities requested a second MFA programme on 3 March 2016. In line with 
the  EUR  2.4  billion  the  Commission  pledged  at  the  ‘Supporting  Syria  and  the  Region’ 
conference  in  London  on  4 February 2016,  the  Commission  adopted  a  proposal  on 
29 June 2016  for  a  decision  on  a  second  MFA  operation  to  Jordan  worth  EUR 200 
million in loans. The new MFA programme, which was approved on 14 December 2016, 
follows the successful implementation of the first MFA operation of EUR 180 million in 
loans, which was fully disbursed in 2015. 

Following  the  signature  of  the  MoU  and  the  loan  facility  agreement  of  the  MFA-II  on 
19 September 2017, the Commission released the first instalment of EUR 100 million on 
25 October 2017.  A  mission  to  review  compliance  with  the  conditions  of  the  second 
instalment took place in Amman in early December 2017. 

Compliance  was  achieved  for  7  of  the  11  MFA  conditions  to:  (i)  improve  public  debt 
management  and  enhance  the  capacity  of  the  Public  Debt  Directorate;  (ii)  enable  the 
withdrawal of the Audit Bureau  from pre-audit activities; (iii) prepare the set-up of the 
national  unified  registry  for  better  targeting  of  social  policies;  (iv)  conduct  a  survey  to 
produce updated poverty indicators; (v) create job opportunities for around 75 000 Syrian 
refugees (including around 233 in the special economic zones designated by the rules of 
origin  agreement);  (vi)  provide  vocational  training  to  Syrian  refugees;  and  (vii)  restore 
the  financial  viability  of  the  water  sector  by  implementing  an  action  plan  to  increase 
revenues  and  reduce  losses  (including  by  promoting  energy  efficiency  in  pumping 
stations). 

By the end of 2017, little or no progress was identified for the other 4 MFA conditions to 
i) amend the Audit Bureau Law to make the Bureau more independent; (ii) submit to the 
Jordanian Parliament a new more progressive Income Tax Law with a lower exemption 
threshold; (iii) reduce tax exemptions in the general sales tax (GST); and (iv) establish an 
independent  system  for  appeals  in  the  case  of  public  procurement.  In  light  of  this,  the 
mission concluded that the disbursement of the second instalment was not yet possible.   

Delays  have  also  been  observed  in  implementing  the  three-year  programme  that  is 
supported by the USD 723 million Extended Fund Facility arrangement, and which was 
approved by the IMF in August 2016. The first IMF programme review (initially planned 
for  December  2016)  was  only  approved  by  the  IMF  Board  in  June  2017,  while  the 
second programme review (initially planned for September 2017) was not conducted in 
2017 because of delays in complying with tax reforms. 

The  Jordanian  authorities  committed  to  work  further  to  comply  with  the  MFA-II 
conditions and with the conditions of the Extended Fund Facility in order to successfully 
complete the second review of the MFA-II and IMF programmes as early as possible in 
2018. 

The European Parliament, the Council and the Commission adopted a joint declaration in 
light  of  the  decision  approving  the  second  MFA  operation.  The  declaration  committed 
the  Commission  to  submit,  if  appropriate,  a  new  proposal  for  extending  and  increasing 
MFA to Jordan, on condition that the second MFA was successfully completed, the usual 
preconditions were met for this type of assistance and there was an updated assessment 
by the Commission of Jordan’s external financing needs. 

10 

 
 
 
STATUS OF ECONOMIC REFORM — JORDAN  

1. Price liberalisation 

Prices are largely free, but there are oligopolistic conditions in several sectors. Fuel subsidies 
have  been  eliminated  since  November  2012.  Electricity  tariffs  and  prices  for  some  basic 
foodstuffs are still subject to administrative controls. The government  adopted an automatic 
adjustment of electricity tariffs based on fuel prices and abolished subsidies on flour. 

2. Trade regime 

Jordan  has  a  relatively  liberal  trade  regime.  It  joined  the  WTO  in  2000  and  ratified  an 
Association Agreement with the EU in 2002. It is also one of the EU’s partner countries that 
could potentially benefit from a DCFTA agreement. It is a member of both the Greater Arabic 
Free Trade Area (GAFTA) and the Agadir Agreement and has also concluded FTAs with the 
United  States,  Turkey,  Syria,  the  European  Free  Trade  Association  (EFTA)  and  Singapore. 
On  19 July 2016,  the  EU  approved  a  10-year  significant  relaxation  of  rules  of  origin  for  a 
wide range of industrial products produced in 18 selected special economic zones, provided 
that each company uses a minimum percentage of Syrian refugee labour in the production. 

3. Exchange rate regime 

Since October 1995, the dinar has been pegged to the US dollar.  

4. Foreign direct investment 

Jordan  is  largely  open  to  foreign  investment.  It  signed  the  OECD’s  Declaration  on 
International  Investment  and  Multinational  Enterprises  in  2013.  However,  there  are  still 
significant  land  ownership  restrictions,  minimum  capital  requirements  and  restrictions  on 
foreign investment in certain sectors, such as the wholesale and retail trade.  

5. Monetary policy 

The Central Bank of Jordan has become more independent. Its main monetary policy tools are 
the  certificates  of  deposit,  through  which  it  influences  retail  interest  rates  in  the  banking 
system.  The  Central  Bank  has  developed  a  credible  track  record  of  ensuring  price  stability, 
maintaining exchange rate stability and promoting growth. 

6. Public finances and taxation 

Between  2007  and  2016,  Jordan’s  tax-to-GDP  ratio  dropped  from  20.4 %  to  16.6 %, 
reflecting structural weaknesses in the taxation system such as the high exemption threshold 
in income tax and the granting of widespread tax exemptions. There is scope for improving 
public  debt  management,  including  by  developing  the  domestic  bond  market.  The  public 
procurement system is fragmented and is not in line with international standards.  

7. Privatisation and enterprise restructuring 

Privatisation started in 1986 in the aftermath of an economic crisis and has made significant 
progress since then. Nevertheless, direct state ownership in certain sectors such as mining and 
public utilities remains significant.  

8. Financial sector 

The financial sector is relatively well developed and dominated by banks, which are generally 
profitable and well capitalised. Banks have already started implementing Basel III. However, 
the  narrow  and  shallow  institutional  investors’  base  restricts  the  development  of  domestic 
capital  markets.  The  Central  Bank  will  develop  a  financial  inclusion  strategy  to  increase 
access to and the use and quality of financial services. 

11 

 
 
 
 
3. 

MOLDOVA 

1.7. Macroeconomic performance 

Economic  performance  is  expected  to  remain  solid  over  the  medium  term,  with  steady 
growth,  moderate  inflation  and  a  gradual  narrowing  of  the  current  account  deficit. 
Moldova experienced a period of relative stability in 2016 and 2017, as it continued to 
recover from the banking crisis. Economic growth was at 4.3 % in 2016 and is estimated 
to  have  moderated  to  3.5 %  in  2017,  supported  by  recovery  of  investment  and  strong 
growth  in  domestic  trade  and  construction.  Accommodative  fiscal  policy  (in  particular 
public investments) and remittances are expected to further sustain economic growth in 
the range of 3.5 %-4.0 % in 2018-2020. 

Annual  inflation  peaked  at  9.6 %  in  2015  in  the  aftermath  of  the  banking  crisis.  It 
decreased to 6.4 % in 2016 as a result of restrictive monetary policy measures. Due to the 
effects  of  adjusting  utilities  tariffs  and  the  impact  of  changes  in  excise  duties,  annual 
inflation  is  expected  to  remain  at  6.5 %  in  2017.  Over  the  medium  term,  inflation  is 
expected to remain anchored at 5 % — the inflation target of Moldova’s central bank. 

Between 2014 and 2016, the government experienced substantial fiscal pressures due to 
lower budget revenues resulting from the weaker economic activity and the interruption 
of  budget  support  from  international  institutions.  With  the  resumption  of  economic 
growth  and  budget  support  from  international  institutions,  the  overall  budget  deficit  is 
projected to increase from 2.1 % of GDP in 2016 to 3.1 % of GDP in 2017. However, the 
expected fiscal deficit for 2017 is narrower than initially projected, following better-than-
expected  revenue  performance  and  delays  in  spending.  Revenue  over-performance  is 
largely  due to  higher-than-expected  trade  activity,  higher  average  wage  growth  and  the 
payoffs from tax and customs reforms. Under-execution of spending relates to delays in 
implementing  road  transportation  projects,  the  reorganisation  of  ministries  and 
uncertainty over external financing. In agreement with the IMF programme, the overall 
budget deficit for 2018 is targeted at 3.3 % of GDP. 

Moldova’s  total  external  debt  is  projected  to  reach  86.7 %  of  GDP  by  end-2017,  down 
from 97.2 % of GDP at end-2016. The reduction largely reflects the strong appreciation 
of  the  nominal  exchange  rate  in  2017  (by  an  estimated  11.3 %)  amid  renewed  capital 
inflows. At 63.3 % of GDP, private external debt, primarily comprising trade credits and 
FDI-related  loans,  is  relatively  high  for  a  low-income  country.  Public  and  publicly 
guaranteed external debt is held mainly by multilateral and bilateral donors and is mostly 
medium and long term and on concessional terms. 

According to IMF projections, the current account deficit is to have widened in 2017 to 
6.3 % of GDP from 4.6 % in 2016. The current account is projected to narrow in 2018 to 
5.4 % and then gradually decline to about 5.0 % in the medium term. The deterioration in 
2017  reflects  rapid  growth  in  non-energy  imports  which  outpaced  strong  growth  in 
exports. Remittances are to have picked up slightly in 2017 but remain well below 2014 
levels. 

As  a  result  of  the  crisis  in  the  financial  sector,  international  reserves  fell  by  35 % 
between  September  2014  and  February  2015,  to  USD  1.7  billion.  Following  the 
stabilisation and recovery of the foreign exchange market in the second half of 2016, the 
country’s  central  bank  had  built  up  USD  2.1  billion  in  foreign  reserves  by  December 
2016. By November 2017, foreign exchange reserves had further increased to USD 2.7 
billion, representing an estimated 5.2 months of projected imports. 

12 

 
 
1.8. Structural reforms 

Following the Council Conclusions of February 2016, the Moldovan authorities adopted 
several  legislative  initiatives  related  to  the  priority  reform  areas  identified  in  the 
Conclusions. 

In March 2017, the EU-Moldova Association Council reaffirmed its commitment to the 
process of political association and economic integration and took stock of the progress 
in implementing the EU-Moldova Association Agreement. 

On  26 February  2018,  the  Foreign  Affairs  Council  adopted  Council  Conclusions 
highlighting  that  it  is  crucial  that  the  reforms  started  in  2016  be  implemented  to  bring 
tangible and visible benefits to the people of Moldova. 

Moldova  is  expected  to  continue  with  its  overall  reform  process  in  line  with  the 
commitments  made  under  the  Association  Agreement  and  the  revised  Association 
Agenda, which sets out 13 key priorities for reform actions for 2017-2019, should serve 
as practical guidance. 

Renewed efforts should be urgently dedicated to a more decisive fight against corruption 
accompanied  by  a  thorough  reform  of  the  judiciary.  A  functioning,  impartial  and 
accountable  justice  system,  a  proven  track  record  of  convictions  for  corruption 
(especially high-level corruption) and respect of the rule of law are key to restoring the 
people’s trust. 

The  Moldovan  authorities  should  ensure  that  there  is  a  thorough,  impartial  and 
comprehensive investigation into the cases of massive banking fraud that were uncovered 
in 2014. This must be done to recover the misappropriated funds and to bring all those 
responsible to justice, regardless of their current political affiliation. 

The  appointment  of  the  leadership  of  the  new  anti-corruption  institutions  and  the 
adoption  of  the  anti-money  laundering  law  are  welcomed.  For  the  ongoing  reforms,  it 
will be crucial to: i) continue strengthening the capacities of the anti-corruption bodies; 
ii) set up a functioning and effective mechanism for freezing, confiscating, managing and 
recovering assets; iii) ensure a functioning system for declaring and verifying assets; iv) 
step up efforts to build a track record in the fight against corruption (especially high-level 
corruption);  and  v)  underpin  the  independence  of  the  anti-corruption  institutions.  It  is 
also  important  to  swiftly  set  up  an  autonomous  office  in  charge  of  preventing  and 
fighting  money  laundering  and  developing  and  approving  mechanisms  to  sanction 
violations  of  the  anti-money  laundering  regime,  and  identify  and  freeze  the  suspicious 
transactions. 

Moldova undertook reforms to improve corporate governance in the financial sector and 
strengthen  the  independence  and  supervisory  powers  of  the  National  Bank.  These 
reforms helped to restore economic and financial stability and were key in the conclusion 
and successful implementation of an agreement with the IMF. Moldova should continue 
to  pursue  reforms  in  order  to  address  the  significant  remaining  challenges,  notably  by 
strengthening  weak  governance,  fighting  against  corruption,  improving  the  business 
environment and lifting potential growth. 

Moldova  should  step  up  its  reform  efforts  to  implement  and  enforce  the  DCFTA,  
including by ensuring that the relevant institutions have more administrative capacity and 
greater  independence,  and  that  the  protection  of  intellectual  property  rights,  including 
geographical indications, is more strictly enforced. 

It  is  also  important  to  have  more  competition  and  greater  transparency  in  the  energy 
sector. This includes ensuring that the energy regulator has the institutional and financial 
capacity to continue reforming the energy market. Moldova should complete the energy 

13 

 
sector reform in line with the EU Third Energy Package, in particular when it comes to 
unbundling gas and electricity transmission and distribution. 

1.9. Implementation of macro-financial assistance 

The Moldovan government requested MFA from the EU in August 2015 and reiterated 
this request in March 2016. On 13 January 2017, the Commission proposed up to EUR 
100 million in MFA to Moldova. Of this amount, EUR 60 million would be in the form 
of loans and EUR 40 million in the form of grants. This proposal was made in light of the 
political and economic developments since 2014. It was based on an updated assessment 
of the country’s external financing needs, the size of the IMF programme, burden-sharing 
considerations and the room of manoeuvre in the EU budget.  

Including  a  grant  is  consistent  with  the  methodology  for  determining  the  use  of  grants 
and loans in EU MFA. This methodology was endorsed by the Economic and Financial 
Committee  in  January  2011  and  mentioned  in  the  Joint  Declaration  that  the  European 
Parliament and the Council adopted together with the decision providing further macro-
financial  assistance  to  Georgia3.  The  Commission’s  proposal  took  into  account  the 
following criteria: 

a)  Moldova  is  a  lower  middle-income  country  with  a  relatively  low  per  capita 

income level; 

b)  while Moldova’s public debt dynamics are judged to be sustainable by the IMF, 
Moldova’s public debt ratios have significantly increased following the banking 
crisis and the depreciation of the leu; 

c)  Moldova  is  eligible  for  concessional  financing  from  both  the  IMF’s  Poverty 
Reduction  and  Growth  Trust  and  the  World  Bank’s  International  Development 
Association. 

On  13 September 2017,  the  European  Parliament  and  Council  signed  the  decision  to 
extend the MFA to Moldova. After publication in the Official Journal (on 20 September), 
the decision entered into force on 23 September. On 20 November 2017, the Commission 
adopted  the  decision  to  approve  the  MoU  on  the  MFA  operation  to  Moldova.  EU 
Member  States  gave  a  favourable  opinion  on  the  MoU  on  13 November 2017.  The 
Memorandum  with 
in  Brussels  on 
24 November 2017.  The  MoU  and  related  documents  (loan  facility  agreement,  grant 
agreement) entered into force in January 2018. 

the  Moldovan  authorities  was 

signed 

On 5-9 February, the Commission visited Chisinau to assess compliance with the MFA 
MoU  conditions  for  the  disbursement  of  the  first  instalment.  The  release  of  the  first 
instalment of MFA of EUR 30 million (of which EUR 20 million in loans and EUR 10 
million  in  grants)  would  be  decided  after  assessing  whether  the  economic  policy 
conditions and political preconditions of the MoU had been fulfilled. 

The  28  policy  conditions  of  the  MoU  focus  on  five  areas  of  reform:  public  sector 
governance, governance and supervision of the financial sector, fight against corruption 
and  money  laundering,  energy  sector  reforms  and  improving  the  business  climate  and 
implementation of the DCFTA. 

More  specifically,  as  part  of  efforts  to  strengthen  the  business  and  investment  climate, 
the  government  will  take  steps  to  reduce  the  administrative  burden  of  starting  and 
operating a business and will adopt a new Customs Service Law and new Customs Code, 
both  of  which  should  help  improve  international  trade.  The  authorities  are  also 

3   OJ L 218, 14.8.2013, p. 18. 

14 

 
                                                            
committed  to  strengthening  the  rule  of  law  and  increasing  the  effectiveness  and 
independence of the judiciary system. 

Furthermore, a substantial number of policy measures in this MoU are aimed at the fight 
against corruption and money laundering. In this context, the Moldovan Parliament will 
adopt  the  new  Law  on  the  Prevention  of  Money  Laundering.  The  authorities  will  also 
strengthen  the  operational  capacities  of  the  agencies  in  charge  of  the  fight  against 
corruption  and  money  laundering,  in  particular  the  National  Integrity  Authority,  the 
Office  for  the  Prevention  and  fight  against  Money  Laundering  and  the  new  Criminal 
Asset Recovery Office.  

Finally, the authorities will pursue implementation of the asset recovery strategy for the 
funds fraudulently transferred from Banca de Economii, Unibank and Banca Sociala. 

In  sum,  the  programme  of  policy  measures  in  the  proposed  MoU  has  been  carefully 
designed to support a job-creating and socially-friendly reform strategy. In addition, the 
EU’s  MFA,  as  part  of  a  substantial  international  assistance  package,  will  provide 
Moldova with the financial relief it needs and facilitate a softer, more gradual adjustment 
of the economy. 

15 

 
 
 
STATUS OF ECONOMIC REFORM — REPUBLIC OF MOLDOVA 

1. Price liberalisation 

Most prices are free, but regulated prices continue to exist for electricity, natural gas, water 
and sanitation, housing and medical services and rail and urban passenger transport. 

2. Trade regime 

Moldova (a WTO member since 2001) has a liberal trade regime. The EU and the Republic 
of  Moldova  have  developed  a  close  trading  relationship  over  the  years.  This  led  to  the 
conclusion  of  an  Association  Agreement,  including  a  DCFTA,  which  was  signed  on 
27 June 2014 and entered fully into force on 1 July 2016. 

3. Exchange rate regime 

Moldova’s  vulnerability  to  external  shocks  requires  it  to  have  a  flexible  exchange  rate 
arrangement that serves as an efficient absorber of such shocks. In this context, the National 
Bank  of  Moldova  follows  flexible  exchange  rate  policies  and  intervenes  on  the  market  to 
smooth sporadic volatility.  

4. Foreign direct investment 

There  are  no  controls  on  inward  investment.  Net  FDI  inflows  are  projected  to  remain 
moderate, averaging USD 106 million per year in 2017-2019. 

5. Monetary policy 

As part of the medium-term monetary policy strategy adopted in December 2010, the central 
bank  targets  inflation  of  5 %  annually  (measured  by  the  consumer  price  index),  with  a 
possible deviation of ± 1.5 percentage points. This is considered to be optimal for the growth 
and development of Moldova’s economy over the medium term. 

6. Public finances and taxation 

The Moldovan government is planning to publish its first Fiscal Risk Statement in 2018. The 
Moldovan  government  is  also  streamlining  the  fiscal  responsibility  framework.  Revenue 
measures  include  increasing  the  excise  rates  on  tobacco,  petroleum  and  alcoholic  products 
and expanding the wealth tax base. The 2018 budget is planned to have aggregate revenue of 
MDL  56.9  billion  or  35.6 %  of  GDP.  Total  expenditure  is  planned  at  MDL  61.7  billion  or 
38.5 % of GDP. The budget deficit for 2018 is targeted at 3.3 % of GDP. 

7. Privatisation and enterprise restructuring 

Moldova has gradually sought to privatise state-owned assets and enterprises. In 2017, stakes 
in a dairy producer, glass container manufacture, carpets manufacturer, agricultural company 
and  a  number  of  properties  were  successfully  privatised.  Privatisation  programmes  under 
preparation include offering stakes in a number of companies in the areas of food processing, 
hospitality, road repair and maintenance and construction. Privatisation of Vestmoldtransgaz 
is  underway.  Vestmoldtransgaz  is  a  natural  gas  transport  company  operating  the  Iasi 
(Romania) — Ungheni (Moldova) pipeline and implementing the construction project of the 
Ungheni-Chisinau pipeline. 

8. Financial sector 

Financial  sector  reform  is  one  of  the  key  challenges  for  Moldova.  The  agenda  of  financial 
sector  reform  has  a  number  of  inter-connected  but  separate  strands.  These  include:  (i) 
completing the liquidation of the three banks involved in the 2014 bank fraud and pursuing 
investigations; (ii) dealing with the governance or solvency problems in the three banks put 
under special supervision by the central bank in June 2015; (iii) strengthening the regulatory 
and  supervisory  framework,  also  part  of  Moldova’s  regulatory  convergence  commitments 
under  its  Association  Agreement  with  the  EU;  (iv)  strengthening  the  regulatory  framework 
and oversight of non-financial institutions, particularly in the insurance sector. 

16 

 
4. 

TUNISIA 

1.10. 

Macroeconomic performance 

In  2017,  Tunisia’s  GDP  grew  by  1.9 %,  signalling  a  moderate  recovery  from  2016  (+ 
1.1 %  compared  to  the  initial  IMF  target  of  +2.5 %)  and  2015,  when  the  two  terrorist 
attacks  of  that  year  hit  the  Tunisian  economy  and  growth  reached  only  0.8 %.  Two 
economic  sectors,  tourism  and  phosphate  production  (two  of  the  main  export  sectors 
heavily affected by, respectively, the terrorist attacks of 2015 and the renewed outburst of 
social unrest in 2016), considerably improved their performance in 2017. 

Unemployment remained high overall (15.3 % at the end of 2017) and even more so for 
university graduates (about 30 %) and particularly women (over 40 %). 

Inflation averaged 5.2 %, reaching 6.4 % at the end of the year (up from 3.7% and 4.2%, 
respectively,  in  2016).  This  was  the  result  of  rebounding  consumption  (+2.4 %) 
combined with the depreciation of the Tunisian dinar. In response to rising inflation, the 
Central  Bank of Tunisia  tightened its  monetary policy in the spring  of 2017 and raised 
the official interest rate by 75 bps, to 5 %. 

On public finances, the deficit reached a level of around 6 % of GDP at the end of 2017 
(against the 5.4 % target, and slightly up from 5.9 % at the end of 2016), with public debt 
at  70 %  of  GDP  (up  from  62 %  in  2016).  On  the  expenditure  side,  the  wage  bill 
continued to absorb, in relative terms, the largest share of resources (nearly half of total 
public expenditure, and about 14 % of GDP) 

The  wage  bill,  at  over  14 %  of  GDP,  is  a  long-standing  issue  for  Tunisia’s  public 
finances. To gradually reduce it, the government agreed to freeze public salaries in 2017 
and  cap  recruitment  at  3 000  new  employees  in  2018.  It  is  also  implementing  a 
programme of early retirement (adopted in June 2017 and to become effective this year, 
with a total of 6 400 applications so far) and is about to launch a programme of voluntary 
resignation from public sector jobs (adopted in January 2018 and expected to concern 10 
000 to 15 000 civil servants). 

Expenditures  in  2017  were  also  considerably  pushed  up  by  debt  service  costs.  At  end-
November,  these  debt  service  costs  reached  the  historically  high  level  of  TND  6.67 
billion (about EUR 2.25 billion), 39 % higher than in November 2016, and are expected 
to amount to TND 7.1 billion in 2017 overall (EUR 2.4 billion). One of the reasons for 
this was the maturity of several external loans at the same time (i.e. a total of about EUR 
690 million in loans from Qatar, Japan and the IMF),  

The  balance  of  payments  situation  remained  vulnerable  in  2017,  although  there  were 
some signs of recovery. 

The trade account continued to deteriorate in 2017 in particular as a result of increasing 
energy  imports,  which  make  up  two  thirds  of  Tunisia’s  total  imports,  and  of  the 
depreciation  of  the  dinar.  Overall,  imports  grew  faster  than  exports,  and  the  cover  rate 
hovered around 70 % throughout the year. The trade deficit grew by 23.7 % from 2016, 
reaching 14.7 % of GDP in November 2017. To curb imports, the Tunisian government 
first introduced a series of general import-restrictive measures in May 2017, and then in 
October the Central Bank rationed credit for the import of a list of 220 goods. Moreover, 
given  the  widening  trade  deficit  with  Turkey,  a  90 %  tariff  top-up  has  been  applied  to 
Turkish  imports.  The  increase  in  tourist  arrivals  in  2017  determined  a  +17.7 %  rise  in 
tourism  revenues  (in  TND)  compared  to  2016.  Inflows  of  remittances  (in  TND)  in 
November  2017  were  13.9 %  higher  than  a  year  earlier.  The  exchange  effect  played  a 
considerable  role  in  both  cases:  the  increase  in  tourism  revenues  and  remittances 

17 

 
expressed in euros amounted to about 2 % and 0.3 % respectively. The current account 
deficit reached the overall level of 10 % of GDP in 2017, up from 9 % of GDP in 2016. 

Foreign  direct  investment  (FDI)  grew  by  8.4 %  from  2016  (+16.2 %  in  the  industrial 
sectors, and -0.9 % in hydrocarbons) and remained stable at around 2 % of GDP in 2017. 

Tunisia’s external debt reached almost 77 % of GDP at the end of 2017. Most of this debt 
is publicly contracted (about 50 % of GDP). The external deficit fell by almost 70 % in 
absolute terms (from TND 1.943 million to TND 597 million) between October 2016 and 
October  2017,  mainly  due  to  the  mobilisation  of  external  resources  (including  the  two 
MFA operations) and the inflow of foreign direct investment. 

On  the  exchange  rate,  between  end-2016  and  end-2017,  the  Tunisian  dinar  depreciated 
against the USD (by 6.3 %) and the EUR (by 17.6 %). Since the beginning of 2011, the 
Tunisian dinar has depreciated by 42 % against the USD and by 35 % against the EUR. 
The currency’s depreciation and the rise in imports have contributed to the depletion of 
international reserves, which amounted to TND 13 billion (about EUR 4.4 billion) and 90 
days of imports at the end of 2017. 

The sources the government used to cover its financing needs in 2017 included: (i) the 
roll-over of a USD 500 million debt repayment to Qatar and an additional new USD 500 
million loan from the country; (ii) USD 320 million from the IMF; (iii) USD 500 million 
from the World Bank;  (iv) EUR 120 million from the African Development Bank; and 
(v) EUR 300 million from EU MFA operations (EUR 100 million from MFA-I, and EUR 
200  from  MFA-II).  In  February  2017,  Tunisia  also  issued  EUR  850  million  in 
Eurobonds, with a maturity of 7 years and a 5.75 % yield. 

1.11. 

Structural reforms 

Tunisia’s  economy  faces  a  number  of  challenges,  which  the  country’s  national  unity 
government  has  pledged  to  address  through  a  comprehensive  programme  of  structural 
reforms.  Although  the  structure  of  the  economy  is  quite  diversified  sector-wise, 
economic activities are mostly concentrated in coastal areas. This translates into a large 
social and economic gap with the regions of the interior. The predominance of the public 
sector as an employer is at the root of the extremely high wage bill, and to some degree, 
of the skills mismatch and high unemployment rate among young people. A high degree 
of administrative bureaucracy, which discourages private investment, and the widespread 
informality of business activities are also detrimental to tax collection and conducive to 
public finance constraints. 

Throughout 2017, the process of reform continued, although it was hindered, to a certain 
degree, by the resignation of certain ministers and the consequent government reshuffle 
in September. 

In  February  2017,  Tunisia’s  Council  of  Ministers  adopted  a  comprehensive  strategy  to 
reform the civil service, with the twofold objective of reducing the wage bill (in the short 
term) and improving the overall management of human resources in the public sector (in 
the medium-long term). A dedicated office for the implementation of the reform ('Unité 
de  gestion  par  objectifs')  has  been  created  within  the  Presidency  of  the  Tunisian 
government to define how the strategy’s various pillars will be implemented.  

On fiscal policy, the 2017 Budget Law continued on the path of the tax reform strategy 
initiated  in  2016,  namely  by  cutting  VAT  exemptions  and  introducing  a  corporate 
income tax ‘top-up rate’ of 7.5 %. 

18 

 
 
On  the  business  environment,  following  the  adoption  of  the  new  Investment  Law  in 
September 2016, a number of implementing decrees were adopted in March 2017. These 
concern:  i)  the  establishment  of  an  office  for  the  implementation  of  the  law  (‘Unité  de 
gestion par objectifs’); ii) the creation of the Higher Council on Investment, the Tunisian 
Investment Agency and the Tunisian Investment Fund; and iii) the setting up of financial 
incentives for investments in priority sectors and geographical areas. 

As  for  social  and  employment  policy,  in  August  2017,  the  Ministry  of  Vocational 
Training  and  Employment  issued  a  decree  launching  the  new  programme  ‘Contrat 
Dignité’ to help bring long-term unemployed young people into the labour market. 

Negotiations between the EU and Tunisia on a Euro-Mediterranean Aviation Agreement 
were  completed  on  11 December 2017  with  the  signature  of  the  Memorandum  of 
Consultations which will accompany the Agreement. 

Despite  this  progress,  the  pace  of  reform  is  still  moderate  and  also  concerns  some 
measures that are linked to the implementation of MFA-II. 

1.12. 

Implementation of macro-financial assistance 

Following  the  Tunisian  Parliament’s  ratification  of  the  legal  documents  on  4  March 
2015, the first MFA operation for Tunisia4 (MFA-I) was launched for an amount of EUR 
300 million. The operation ended on 20 July 2017. The assistance was disbursed in three 
equal instalments of EUR 100 million. The first instalment, disbursed in May 2015, was 
conditional  on  good  progress  under  the  IMF’s  stand-by  arrangement.  The  Commission 
disbursed the second instalment of the assistance in December 2015 after the conditions 
in  the  MoU  had  been  satisfied  and  the  sixth  review  of  the  IMF  programme  had  been 
successfully  completed  on  30 September  2015.  Disbursement  of  the  third  and  final 
instalment of EUR 100 million took place on 20 July 2017, following the IMF Board’s 
approval  of  the  first  review  of  the  Extended  Fund  Facility  programme  on  12 June,  and 
the Commission’s positive assessment of all relevant MoU conditions but one, for which 
a  waiver  was  granted.  The  waived  condition  referred  to  the  Tunisian  legislative  work 
leading to the negotiations for an Agreement on Conformity Assessment and Acceptance 
of Industrial Products with the EU. 

In  February  2016,  following  a  request  from  Tunisia,  the  Commission  submitted  a 
proposal to the European Parliament and the Council to grant a second MFA operation to 
Tunisia  (MFA-II)  for  a  maximum  of  EUR  500  million,  in  the  form  of  medium-term 
loans. The legislative decision on this new operation was adopted in July 20165 and the 
draft MoU was agreed on with the Tunisian authorities in December. The MoU and the 
loan  facility  agreement  were  signed  on  27 April 2017.  Following  the  Tunisian 
Parliament’s ratification on 28 July 2017, the MoU entered into force on 11 August 2017. 

The second and third instalments of MFA-II are conditional on: 

improving public finance management; 

 
  reforming the tax system to increase tax collection while improving tax equity; 
  strengthening and better targeting the social safety net; 

4   Decision No 534/2014/EU of the European Parliament and of the Council of 15 May 2014 providing 

macro-financial assistance to the Republic of Tunisia (OJ L 151, 21.5.2013). 

5    Decision No 1112/2016/EU of the European Parliament and of the Council of 6 July 2016 providing 

further macro-financial assistance to Tunisia (OJ L186, 9.7.2016). 

19 

 
                                                            
  strengthening the banking system; 
  promoting investment and supporting the recovery of the tourism sector; 
 

labour  market  policies 

to 

reduce  Tunisia’s  high 

implementing  active 
unemployment rate. 

The first instalment of EUR 200 million was disbursed on 25 October 2017 and was only 
conditional on good progress under the IMF’s Extended Fund Facility. The second and 
third instalments, amounting to EUR 150 million each, are to be disbursed in the course 
of 2018. 

The implementation of MoU conditions tied to the disbursement of the second instalment 
was assessed as mostly satisfactory during the Commission’s inspection in January 2018. 
One  condition,  related  to  the  Tunisian  Parliament’s  adoption  of  a  new  law  on  the 
country’s Court of Auditors, still remains to be fulfilled. If this condition is fulfilled by 
the spring and the IMF Board approves the second programme review, the second MFA-
II instalment may be disbursed before the summer. 

Finally,  the  Joint  Communication  of  29 September 2016  of  the  HRVP  and  the 
Commission  to  the  European  Parliament  and  the  Council  envisaged  the  possibility  of 
granting further macro-financial assistance to Tunisia, if appropriate, on the basis of an 
assessment of the country’s economic and financial needs. 

20 

 
 
 
 
STATUS OF ECONOMIC REFORM — TUNISIA  

1. Price liberalisation 

Most  prices  are  free,  but  regulated  prices  exist  for  fuel,  electricity,  transport  and  food 
products.  An  automatic  price-adjustment  mechanism  for  fuel  prices  was  meant  to  be 
gradually adopted starting in 2017; however, the process was only partly initiated with a one-
off cut in fuel subsidies in July 2017 and the adoption of a formula at the end of 2017 which 
did not take into account the recent increase in oil prices. 

2. Trade regime 

Tunisia  joined  the  WTO  in  1995  and  was  the  first  Mediterranean  country  to  sign  an 
Association  Agreement  with  the  EU  in  1995.  Tariff  dismantling  under  the  Agreement  was 
completed  in  2008.  In  April  2016,  negotiations  started  for  an  EU-Tunisia  DCFTA.  In  the 
course of 2017, in response to the deterioration of the trade and current account deficit, the 
Tunisian government introduced a number of measures aimed at curbing imports. 

3. Exchange rate regime 

The Central Bank of Tunisia changed its operational framework for exchange rate policy in 
2012 to make rates more flexible. The Tunisian dinar is fully convertible for current account 
transactions but there are still limitations on its convertibility for capital account transactions. 

4. Foreign direct investment 

Since 1972, FDI has benefited from incentives for exporting enterprises. The new Investment 
Law  adopted  in  2016  and  its  implementing  decrees  aim  to  foster  investments  (both  foreign 
and  local)  through  a  progressive  liberalisation  of  the  market  and  by  establishing  fiscal  and 
financial incentives for new investments in a number of sectors. The gap between corporate 
tax rates applying to the off-shore and on-shore regimes has recently been reduced.  

5. Monetary policy 

The  Central  Bank  is  independent  and  its  mandate  is  to  ensure  price  stability.  Since  the 
revolution, the government has undertaken a review of the relevant legislation to strengthen 
the  Bank’s  independence  and  good  governance.  A  new  law  adopted  in  April  2016  is  set  to 
strengthen the central bank’s governance and establish its function as a lender of last resort.  

6. Public finances and taxation 

Central government expenditure made up over 30 % of GDP in 2017. About half of this was 
expenditure  on  salaries.  Transfers  and  subsidies,  of  which  the  bulk  is  energy  and  food, 
represented almost 6 % of GDP. The subsidy system, the civil service and the tax system are 
undergoing protracted reform. 

7. Privatisation and enterprise restructuring 

Privatisation  almost  ground  to  a  halt  following  the  2011  revolution,  partly  because  it  is 
associated with questionable practices and processes under the previous administration. The 
repossession and sale of assets belonging to the previous ruling elite are ongoing.  

8. Financial sector 

The  country’s  three  largest  public  banks,  which  represent  40 %  of  total  banking  system 
assets, are hampered by weak lending practices, governance issues and excessive exposure to 
the tourism sector. This has increased vulnerabilities in the sector. A 2012 IMF/World Bank 
assessment warned that the banking system had recapitalisation needs of around 2 % of GDP; 
the  recapitalisation  carried  out  in  2015  amounted  to  1 %.  Given  the  negative  impact  of  the 
2015  terrorist  attacks  on  the  tourism  sector,  additional  financing  needs  for  these  banks  are 
likely to arise in the short to medium term. A new banking law, including aspects such as a 
banking  resolution  mechanism,  prudential  regulations  and  improved  governance  and  bank 
bankruptcy provisions, was adopted in May 2016. 

21 

 
 
5. 

UKRAINE 

1.13. 

Macroeconomic performance 

Ukraine was affected by a particularly deep recession in 2014 and 2015, where real GDP 
contracted  by  6.6 %  and  9.8 %  respectively.  While  reflecting  Ukraine’s  long-standing 
macroeconomic and structural weaknesses, the economic crisis was largely driven by the 
loss  in  confidence  and  the  damage  to  production  capacity  resulting  from  the  conflict 
provoked by Russia’s destabilising actions in the East of the country. The combination of 
a  strong  policy  response  and  a  large-scale  international  support  package  helped  the 
economy  return  to  growth  in  2016  (2.4 %).  The  recovery  continued  into  2017,  when 
GDP  growth  accelerated  to  2.5 %,  despite  the  negative  impact  of  a  cargo  blockage 
introduced  in  March  2017  in  the  non-government-controlled  areas.  The  expansion  of 
economic activity in 2017 was mainly driven by investment and household consumption, 
on the back of wage growth and exchange rate stabilisation. 

Despite the economic crisis, Ukraine’s public finances have been consolidated over the 
past  3  years:  the  overall  fiscal  deficit,  including  the  deficit of  the  oil  and  gas  company 
Naftogaz, was reduced from 10 % of GDP in 2014 to only 1.6 % in 2017 (compared with 
a 2.7 % ceiling set by the authorities). The better-than-expected fiscal outcome in 2017 
reflected  robust  tax  collection,  rising  dividend  payments  from  state-owned  enterprises 
and  some  one-off  factors  such  as  the  confiscation  of  frozen  assets  of  former  President 
Yanukovych  (totalling  1 %  of  GDP).  In  another  positive  development,  quasi-fiscal 
deficits,  associated  with  the  recapitalisation  of  state-owned  companies  and  banks,  have 
been  significantly  reduced,  notably  due  to  the  elimination  of  the  operating  deficit  of 
Naftogaz.  Such  fiscal  consolidation,  coupled  with  relative  exchange  rate  stability  since 
2016, has also helped reduce the general government debt at 71.6 % of GDP at end-2017 
from around 80 % a year earlier. 

The  2018  budget  envisages  a  fiscal  deficit  of  2.4 %  of  GDP  (in  line  with  the  2.5 % 
ceiling in the IMF programme) and is based on assumptions of 3 % real GDP growth and 
9 %  consumer  price  inflation.  The  disinflation  trend  that  prevailed  from  spring  2015 
(60.9 %  in April  2015)  to  mid-2016  (6.9 %  in  June  2016)  has  been  gradually reversed. 
The  pick-up  in  inflation  in  2017  (13.7 %  in  December)  has  been  driven  by  growing 
production costs and consumer demand (notably resulting from wage hikes), as well as 
rising  raw  food  prices  (due  to  the  frost  in  early  2017  which  damaged  crops)  and  fuel 
prices. Growing inflationary pressure has led the central bank to raise its policy interest 
rate from 12.5 % in October 2017 to 14.5 % in December 2017. 

With respect to the external sector, Ukraine’s current account deficit gradually widened 
to 1.9 % of GDP in 2017 (after 1.4 % of GDP in 2016), following the sharp downward 
adjustment  induced  by  the  economic  crisis  (from  9 %  of  GDP  in  2013  to  a  surplus  of 
1.8 %  in  2015).  The  widening  of  the  current  account  deficit  in  the  past  2  years  mainly 
reflects the recovery in investment imports (in line with growing business confidence) as 
well  as  robust  domestic  consumption.  Private  capital  inflows  have  also  increased, 
especially  as  a  result  of  a  USD  3  billion  Eurobond  placement  by  the  government  in 
September 2017. The support from Ukraine’s multilateral and bilateral partners, coupled 
with  current  account  adjustment  and  a  gradual  return  of  private  financial  flows,  helped 
Ukraine  replenish  its  international  reserves  to  USD  18.8  billion  at  end-2017,  despite 
weakness in FDI. 

Despite  the  improvement  of  Ukraine’s  economic  situation  since  2015,  a  number  of 
vulnerabilities  remain.  Reserves  remain  below  IMF  adequacy  standards,  notably  in  a 

22 

 
context  of  high  external  indebtedness.  Additionally,  the  unstable  domestic  political 
environment and a continued threat of intensification of tensions in the eastern part of the 
country are downside risks that could weigh on the still timid recovery. Moreover, being 
a commodity exporter (agricultural products and metals accounted for 70 % of Ukraine’s 
merchandise  exports  in  2017),  Ukraine  remains  particularly  vulnerable  to  worsening 
terms  of  trade.  In  fact,  the  global  plunge  of  commodity  prices  was  a  key  contributing 
factor in the balance of payments crises which Ukraine experienced in 2009 and 2014-
2015. 

Ukraine’s high external indebtedness constitutes another source of vulnerability. Despite 
steep  deleveraging  by  the  corporate  and  banking  sectors  since  the  2014  crisis,  gross 
external debt amounted to USD 116.6 billion at the end of 2017 (around 106 % of GDP), 
including  USD  46.7  billion  of  short-term  maturities.  While 
this  debt  relates 
predominantly to the private sector and does not represent as such a direct liability for the 
state, part of it is related to state-owned companies (sometimes guaranteed by the state) 
and thus amounts to a contingent liability for the authorities. The amount of direct state-
owned  external  debt  maturing  in  the  following  year  has  significantly  declined  with  the 
crisis,  as  the  authorities  resorted  to  long-term  lending  from  international  financial 
institutions and rescheduled some USD 15 billion  of bonded debt (both directly owned 
and guaranteed) with its November 2015 debt operation. However, payment obligations 
under the restructured bonds resume in 2019. 

While Ukraine has  managed  to  replenish its gross  international reserves over the last 3 
years,  the  process  has  been  slower  than  initially  planned  by  the  IMF.  With  USD  18.8 
billion at end-2017, reserves remain below their pre-crisis level and the level foreseen in 
the  IMF  programme  (USD  22.3  billion  by  end-2017).  Reserves  could  come  under 
renewed pressure in 2018-2019, when the country is expected to make more than USD 
12 billion in payments (interest and principal) on sovereign and quasi-sovereign external 
debt.  This  peak  in  debt  repayments  comes  at  the  time  of  the  presidential  and 
parliamentary  elections  in  2019.  In  this  context,  the  further replenishment  of  Ukraine’s 
international  reserves  seems  necessary,  and  the  EU’s  additional  MFA  could  usefully 
support this effort, both directly (through its disbursements) and indirectly (as a catalyst 
for private capital inflows and instilling confidence in the local currency). 

Continued support from the IMF and Ukraine’s international partners, including the EU, 
therefore remains essential. Since the onset of the crisis, the USD 17.5 billion Extended 
Fund  Facility  programme  for  Ukraine  approved  by  the  IMF  in  March  2015  has  been 
complemented by substantial support from Ukraine’s bilateral partners, including the EU. 
Other international financial institutions such as the World Bank, the EBRD and the EIB 
have  also  significantly  scaled  up  their  activity  to  support  the  country’s  economic 
transition. However, as Ukraine’s economy remains fragile and exposed to a number of 
vulnerabilities, the IMF estimates that the country will face additional external financing 
needs in 2018 and early 2019. In this context, the Commission received a request from 
the Ukrainian authorities for additional EU MFA in November 2017. 

23 

 
 
 
 
 
 
1.14. 

Structural reforms 

With  the  political  transition  in  2014,  Ukraine  embarked  on  an  ambitious  and  wide-
ranging reform programme. This programme was supported by large-scale financial and 
technical assistance  provided by multilateral  and bilateral partners. However,  following 
the  initial  strong  impulse  for  reform  in  2014-2015,  progress  became  uneven  in  2016-
2017.  This  had  an  impact  not  only  on  the  pace  of  economic  recovery  but  also  on  the 
implementation of the financial support programmes for the country. The main obstacles 
to  a  faster  implementation  of  reforms  are  the  complex  domestic  political  environment, 
the  lack  of  political  will  to  implement  ambitious  reforms  in  sectors  such  as  the  fight 
against corruption, and the strong opposition by vested interests which continue to exert a 
strong influence on policy-making in the country. 

In  April  2017,  the  Ukrainian  government  approved  a  mid-term  priority  action  plan  to 
2020, which outlines the main reform areas the authorities plan to pursue in the next few 
years.  It  consists  of  five  pillars:  (i)  economic  growth;  (ii)  effective  governance;  (iii) 
human  capital  development;  (iv)  rule  of  law  and  the  fight  against  corruption;  and  (v) 
security  and  defence.  Despite  the  unpropitious  external  environment  and  significant 
internal  challenges,  Ukraine  managed  to  push  through  reforms  in  a  variety  of  sectors, 
notably as part of the policy programmes attached to IMF assistance and MFA. 

For public finance management, the authorities strengthened the external audit function 
and  improved  transparency  in  public  procurement,  which  resulted  in  substantial  fiscal 
savings  for  the  state.  Fiscal  governance  was  strengthened  by  introducing  measures  to 
improve tax compliance and by launching mid-term budgetary planning. 

Governance  reforms  resulted  in  the  set-up  of  new  anti-corruption  institutions  in  2015-
2016, with one of them, the National Anti-Corruption Bureau, already playing a critical 
role  in  investigating  corruption  offences.  In  September  2016,  the  authorities  also 
launched an electronic platform for the submission of asset declarations by senior public 
officials.  However,  the  National  Agency  for  the  Prevention  of  Corruption,  which  is  in 
charge  of  verifying  these  declarations  to  identify  possible  cases  of  corruption  offences, 
currently remains unable to conduct this function in an efficient manner, as it has not yet 
introduced a mechanism for automatic verification. 

A judiciary reform introduced in 2016 saw the election of a new Supreme Court in 2017 
and the launch of competitive selection procedures for judges at lower instance courts. A 
major  reform  of  public  administration  was  launched  in  mid-2016.  It  is  expected  to 
depoliticise  and  professionalise  the  civil  service  and  improve  its  effectiveness.  While 
the  corporate  governance  and 
important  measures  were 
transparency of state-owned companies, the government’s privatisation efforts have not 
yielded any results yet.    

launched 

improve 

to 

The  energy  sector  also  witnessed  comprehensive  reforms:  i)  the  independence  of  the 
market  regulator  was  strengthened  with  the  adoption  of  a law  in  September  2016;  ii)  a 
new law on electricity was adopted in April 2017 to increase competition in the sector; 
and iii) major steps were taken to improve energy efficiency. Strong progress was made 
in  reforming  the  gas  sector,  although  the  strategy  approved  for  the  unbundling  of 
Naftogaz  has  not  been  fully  implemented  yet.  Household  gas  tariffs  were  increased 
considerably  to  better  reflect  market  levels,  while  utility  subsidies  were  raised  to 
compensate poorer households for the tariff hike. 

Other  major  reforms  included  deregulation,  making  the  competition  authority  more 
efficient and decentralisation, which has already resulted in positive fiscal implications. 

24 

 
In  the  social  sphere,  the  authorities  launched  major  pension,  education  and  healthcare 
reforms. In the banking sector, the focus was on cleaning up the segment from unviable 
players and recapitalising the remaining banks to stabilise the system and pave the way 
for recovery in credit activity. 

1.15. 

Implementation of macro-financial assistance 

In January 2015, the Commission proposed a new MFA operation (the third since 2014) 
consisting  of  loans  of  up  to  EUR  1.8  billion,  to  be  made  available  in  three  equal 
instalments  of  EUR 600 million.  This  was  done  because  of  Ukraine’s  rapidly 
deteriorating  economic  situation  and  weak  balance-of-payments  position  resulting  from 
the  armed  conflict  in  the  eastern  part  of  the  country.  The  co-legislators  adopted  the 
Commission  proposal  in  April  2015.  In  July  2015,  the  first  instalment  of  EUR  600 
million was disbursed to Ukraine. 

Although the second instalment of EUR 600 million was initially planned to be released 
in autumn 2015, the disbursement was delayed due to Ukraine’s weak implementation of 
a  number  of  reforms  attached to  this  instalment.  The  Commission  eventually  disbursed 
the  instalment  in  April 2017,  following  additional  steps  by  the  Ukrainian  authorities to 
address outstanding issues, which enabled the Commission to make a positive assessment 
of Ukraine’s overall implementation of the agreed policy programme. 

A  third  instalment  of  EUR  600  million  was  available  to  Ukraine  under  this  MFA 
programme.  It  was  also  dependent  on  the  implementation  of  a  number  of  measures. 
Ukraine  fulfilled  17  of  the  21  policy  commitments  attached  to  this  disbursement, 
including reforms in public finance management, public administration, the energy sector 
and  the  judiciary.  However,  Ukraine  had  not  implemented  several  measures  when  the 
validity  period  of  the  MFA  expired.  These  included  two  measures  to  fight  corruption, 
with  the  introduction  of  a  mechanism  to  verify  asset  declarations  submitted  by  public 
officials. As a result, the third instalment of MFA was cancelled on 18 January 2018. 

In November 2017, Ukraine requested additional MFA from the EU to cover its external 
financing  gap  and  support  the  authorities’  reform  agenda.  Following  an  assessment  of 
this  request,  the  Commission  submitted  a  proposal  to  the  European  Parliament  and  the 
Council for further MFA to Ukraine on 9 March 2018. The Commission is proposing up 
to  EUR  1  billion  in  the  form  of  loans.  According  to  the  current  tentative  plan,  the 
European  Parliament  and  the  Council  could  adopt  the  Decision  in  June  2018,  and  a 
memorandum of understanding — listing specific policy conditions for MFA — could be 
signed  shortly  after  that.  The  MFA  to  Ukraine  is  expected  to  be  disbursed  in  two 
instalments — one in 2018 and one in early 2019. 

25 

 
 
 
STATUS OF ECONOMIC REFORM — UKRAINE 

  Price liberalisation 

While most prices are determined freely, regulated prices remain for utilities (particularly gas 
and electricity) and public transport.  

  Trade regime 

Ukraine joined the WTO in May 2008. The EU-Ukraine Association Agreement entered into 
force  on  1 September 2017;  the  provisions  on  the  Deep  and  Comprehensive  Free  Trade  Area 
(DCFTA) had been provisionally applied since January 2016. 

  Exchange rate regime 

Following the decision to abandon the currency peg in February 2014, Ukraine’s central bank 
has  implemented  a  managed  float  regime.  In  2017,  the  central  bank  continued  to  ease  the 
various administrative measures that were introduced to contain the currency crises from 2014 
and early 2015. The central bank intervenes regularly on the foreign exchange market to reduce 
exchange rate volatility and replenish its reserves. 

  Foreign direct investment 

Some restrictions on FDI-related flows exist, such as a ban on the purchase of agricultural land. 
Capital controls that affect foreign investment activity persist, despite their gradual elimination. 

  Monetary policy 

The  central  bank’s  primary  objective  is  to  achieve  and  maintain  price  stability  under  an 
inflation targeting framework. The pick-up in inflation in late 2016 and 2017 (from +6.9 % in 
June  2016  to  +13.7 %  in  December  2017)  drove  the  central  bank  to  gradually  raise  its 
benchmark interest rate from 12.5 % in October 2017 to 14.5 in December 2017. The inflation 
target for end-2018 is 6 % plus/minus 2 percentage points. 

  Public finances and taxation 

General government expenditures remain high. However, measures are being implemented to 
streamline outlays and improve control over them. On the revenue side, the tax base has been 
gradually  widened,  and  Naftogaz’s  operational  deficit  has  been  eliminated.  Risks  for  the 
sustainability of public finances stem from the high financing needs of the pension system (an 
issue  that  will  not  be  entirely  solved  by  the  recently  adopted  pension  reform)  and  the  still 
narrow tax base. 

  Privatisation and enterprise restructuring 

Despite ambitious privatisation plans, no major sales of state assets took place in 2017. A law 
on privatisation was adopted in January 2018, in line with requirements under Ukraine’s IMF 
programme.  

  Financial sector 

The  authorities  continued  implementing  ambitious  measures  coordinated  with  the  IMF  to 
strengthen  confidence  in  the  system,  including  by  improving  supervision,  ensuring  the 
recapitalisation  of  commercial  banks  and  resolving  related  party  lending.  Following  the 
nationalisation  in  December  2016  of  the  largest  commercial  bank,  PrivatBank,  Ukraine’s 
banking sector is now dominated by state-owned banks, which represented 56 % of net assets 
and 62 % of retail deposits in July 2017.  

26 

 
 
 
ANNEXES 

Annex 1: Selected macroeconomic indicators by country 

MFA  complements  and  is  conditional  on  the  existence  of  an  adjustment  and  reform 
programme  agreed  with  the  International  Monetary  Fund  (IMF).  To  facilitate 
comparability,  this  section  thus  quotes  the  latest  IMF  data  available  for  the  selected 
macroeconomic indicators.6 

6 These may vary from the statistics quoted in the country-analysis section of this document. 

27 

20142015201620172018Real GDP(% change)4.62.92.84.84.5Inflation (end of period) (% change)2.04.91.86.73.0Unemployment rate(% labour force)12.412.011.8n/an/aVolume of imports of goods and services(% change)8.84.70.7-0.29.0Volume of exports of goods and services(% change)-5.4-18.74.215.77.6General government net lending/borrowing(% of GDP)-1.9-1.3-1.6-0.5-0.7General government gross debt(% of GDP)35.641.444.644.944.2Current account balance(% of GDP)-10.7-12.0-12.8-9.3-10.5Gross official reserves(months of imports)3.63.53.53.33.4Total gross external debt(% of GDP)83.786.192.193.393.4Sources: IMF World Economic Outlook Database (April 2018), IMF Regional Economic Outlook (May 2018)Forecast years: 2017-2018Georgia20142015201620172018Real GDP(% change)3.12.42.02.32.5Inflation (end of period) (% change)1.7-1.60.82.52.5Unemployment rate(% labour force)11.913.115.3n/an/aVolume of imports of goods and services(% change)0.2-3.2-2.9-2.83.3Volume of exports of goods and services(% change)6.2-7.40.82.03.2General government net lending/borrowing(% of GDP)-10.1-5.1-3.4-2.5-0.4General government gross debt(% of GDP)89.093.495.195.693.5Current account balance(% of GDP)-7.3-9.1-9.3-8.7-8.5Gross official reserves(months of imports)7.99.28.48.28.5Total gross external debt(% of GDP)31.265.866.968.470.3Sources: IMF World Economic Outlook Database (April 2018), IMF Regional Economic Outlook (May 2018)Forecast years: 2017-2018Jordan 
 
 
                                                            
28 

20142015201620172018Real GDP(% change)4.8-0.44.34.03.5Inflation (end of period) (% change)4.713.52.47.34.0Unemployment rate(% labour force)3.94.94.24.24.2Volume of imports of goods and services(% change)1.0-5.07.610.71.7Volume of exports of goods and services(% change)2.01.07.716.67.7General government net lending/borrowing(% of GDP)-1.9-2.3-2.1-1.0-3.2General government gross debt(% of GDP)36.044.842.137.739.8Current account balance(% of GDP)-3.9-5.7-4.0-4.7-3.7Gross official reserves(months of imports)5.44.44.75.25.2Total gross external debt(% of GDP)84.999.297.286.783.7Sources: IMF World Economic Outlook Database (April 2018), IMF Country Report (December 2017)Forecast years: 2017-2018Moldova20142015201620172018Real GDP(% change)2.31.11.01.92.4Inflation (end of period) (% change)4.84.14.26.46.5Unemployment rate(% labour force)15.315.415.515.315.0Volume of imports of goods and services(% change)2.6-2.52.02.2-1.1Volume of exports of goods and services(% change)4.2-2.80.24.18.9General government net lending/borrowing(% of GDP)-3.7-5.3-5.9-6.0-5.2General government gross debt(% of GDP)51.654.861.271.373.1Current account balance(% of GDP)-9.1-8.9-8.8-10.1-9.2Gross official reserves(months of imports)4.24.13.23.13.4Total gross external debt(% of GDP)56.262.766.378.179.7Sources: IMF World Economic Outlook Database (April 2018), IMF Regional Economic Outlook (May 2018)Forecast years: 2017-2018Tunisia 20142015201620172018Real GDP(% change)-6.6-9.82.42.53.2Inflation (end of period) (% change)24.943.312.413.79.0Unemployment rate(% labour force)9.39.19.39.49.2Volume of imports of goods and services(% change)-25.0-28.67.815.45.3Volume of exports of goods and services(% change)-10.5-11.9-3.68.18.3General government net lending/borrowing(% of GDP)-4.5-1.2-2.2-2.4-2.5General government gross debt(% of GDP)70.379.381.275.678.4Current account balance(% of GDP)-3.9-0.3-4.1-3.7-3.7Gross official reserves(months of imports)1.83.33.54.75.9Total gross external debt(% of GDP)95.4130123.8127.4126.3Sources: IMF World Economic Outlook Database (April 2018), IMF Country Report (April 2017)Forecast years: 2017-2018Ukraine 
 
 
 
 
 
Annex 2: MFA operations by date of decision, 1990-2017 

29 

Country1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017TotalNumber of operationsBulgaria2901102501007504Czech & Slovak Fed. Rep.3753751Estonia40401Hungary87018010502Latvia80801Lithuania1001001Romania375801252007804Slovakia1301301Algeria4002006002Israel187.5187.51Jordan1802003802Lebanon80801Tunisia3005008002Armenia581001582Belarus55551Georgia17533.54646300.54Moldova4515151545901003257Ukraine852001501105001000180038457Albania703520251504Bosnia & Herzegovina60601002203Kosovo (UNSCR 1244)3530501153Macedonia (FYR)4080181383Montenegro20201Serbia2002001Serbia & Montenegro345130705453Tajikistan95951Kyrgyz Republic30301Amount approved87018084800620255155231504601653933157025083.5125044659000256130018007001001154911549No. of operations approved16606214154341102204200321216464* MFA received before becoming EU Member StateAcecssion and Pre-AccessionCurrent Member States*Neighbourhood SouthMFA Operations 1990 - 2017 by Date of DecisionNeighbourhood EastOther 
 
 
Annex  2A:  Status  of  effective  disbursements  by  date  of  decision  at  end-December 
2017 

30 

Status of effective disbursements as of end-December 2017 (in millions of €) AuthorisationsDisbursementsCountry Date ofReference ofMaximumDates ofAmounts ofTotalsUndisbursedDecisionDecisionamountdisbursementsdisbursementsdisbursedHungary22.02.9090/83/EC870Apr. 1990350610260(Loan)Feb. 1991260Czech and 25.02.9191/106/EC375Mar. 1991185375Slovak Federal RepublicMar. 1992190Hungary24.06.9191/310/EC180Aug. 1991100180(Loan)Jan. 199380Bulgaria24.06.9191/311/EC290Aug. 1991150290(Loan)Mar. 1992140Romania22.07.9191/384/EC375Jan. 1992190375(Loan)Apr. 1992185Israel122.07.9191/408/EC187.5Mar. 1992187.5187.5(Loan)Algeria23.09.9191/510/EC400Jan. 1992250400(Loan)Aug. 1994150Albania28.09.9292/482/EC70Dec. 19923570(Grant)Aug. 199335Bulgaria19.10.9292/511/EC110Dec. 199470110(Loan)Aug .199640Baltics23.11.9292/542/EC22013585(Loans); of which:    Estonia(40)Mar. 199320(20)(20)    Latvia(80)Mar. 199340(40)(40)    Lithuania(100)July 199350(75)(25)Aug. 199525Romania27.11.9292/551/EC80Feb. 19938080(Loan)Moldova13.06.9494/346/EC45Dec. 19942545(Loan)Aug. 199520Romania20.06.9494/369/EC125Nov. 199555125(Loan)Sep. 199740Dec. 199730Albania28.11.9494/773/EC35June 19951535(Grant)Oct. 199620EU MACRO-FINANCIAL AND EXCEPTIONAL FINANCIAL ASSISTANCE TO THIRD COUNTRIES BY DATE OF DECISION 
 
31 

Algeria22.12.9494/938/EC200Nov. 1995100100100(Loan)Slovakia22.12.9494/939/EC130July 1996130(Loan)Ukraine22.12.9494/940/EC85Dec. 19958585(Loan)Belarus10.04.9595/132/EC55Dec. 1995303025(Loan)Ukraine23.10.9595/442/EC200Aug. 199650200(Loan)Oct. 199650Sep. 1997100Moldova25.03.9696/242/EC15Dec. 19961515(Loan)Former Yugoslav 22.07.9797/471/EC40Sep. 19972540Republic of MacedoniaFeb. 199815(Loan)Bulgaria22.07.9797/472/EC250Feb. 1998125250( Loan)Dec. 1998125Armenia, Georgia 17.11.9797/787/EC(375)(294.5)and Tajikistan2amended by(Loans and Grants)28.3.0000/244/EC Agreed amounts with the recipent countires:328294.533.5Armenia(58)Dec. 1998 (Loan)28(58)(Loan and Grant)Dec. 1998 (Grant)8Dec.  1999 (Grant)4Feb. 2002 (Grant)5.5Dec. 2002 (Grant)5.5June 2004 (Grant)5.5Dec. 2005 (Grant)1.5Georgia(175)Jul. 1998 (Loan)110(141.5)(33.5)(Loan and Grant)Aug. 1998 (Grant)10Sep. 1999 (Grant)9Dec. 2001 (Grant)6Dec. 2004 (Grant)6.5Tajikistan(95)Mar. 2001 (Loan)60(95)(Loan and Grant)Mar. 2001 (Grant)7Dec. 2001 (Grant)7Feb. 2003 (Grant)7May. 2005 (Grant)7Oct. 2007 (Grant)7 
 
32 

Ukraine15.10.9898/592/EC150July 1999585892(Loan)12.07.0202/639/ECAlbania22.04.9999/282/EC2020( Loan)Bosnia310.05.9999/325/EC60Dec. 1999 (Grant)1560(Loan and Grant)amended byDec. 1999 (Loan)1010.12.0101/899/ECDec. 2000 (Grant)10Dec. 2000 (Loan)10Dec. 2001 (Grant)15Bulgaria08.11.9999/731/EC100Dec. 199940100(Loan)Sep. 200060Former Yugoslav 08.11.9999/733/EC80Dec. 2000 (Grant)2098Republic of18Dec. 2000 (Loan)10Macedonia410.12.0101/900/ECDec. 2001 (Loan)12(Loan and Grant)Dec. 2001 (Grant)10May 2003 (Grant)10June 2003 (Loan)10Dec. 2003 (Loan)18Dec. 2003 (Grant)8Romania08.11.9999/732/EC200June 200010015050(Loan)July 200350Kosovo519.02.0000/140/EC35Mar. 20002035(Grant )Aug. 200015Montenegro522.05.0000/355/EC20Aug. 2000720(Grant )Dec. 200013Moldova10.07.0000/452/EC1515(Loan)19.12.0202/1006/ECKosovo327.06.0101/511/EC30Sep. 20011530(Grant) Dec. 200215Serbia and 16.07.0101/549/EC345Oct. 2001 (Loan)225345Montenegro6Oct. 2001 (Grant)35(ex FRY)10.12.0101/901/ECJan. 2002 (Grant)40(Loan and Grant)Aug. 2002 (Grant)45Ukraine12.07.0202/639/EC110May. 2014 100110(Loan) Amendment of Decision Nov. 2014 1098/592/ECamended byamended by 
 
33 

Serbia and 05.11.0202/882/EC130Dec. 2002 (Grant)3010525Montenegro7Feb. 2003 (Loan)10(ex FRY)Aug. 2003 (Grant)35(Loan and Grant)Aug. 2003 (Loan)30Bosnia805.11.0202/883/EC60Feb. 2003 (Grant)1525 the rest was (Loan and Grant)Dec. 2003 (Grant)10paid under04/861/ECMoldova19.12.0202/1006/EC1515(Grant)Serbia and 25.11.0303/825/EC70Dec. 2004 101020Montenegro7 the rest was (ex FRY)paid underAmendment of Decision 02/882/EC (Grant)04/862/ECAlbania929.04.0404/580/EC25Nov. 2005 (Grant)325(Loan and Grant)Mar. 2006 (Loan)9July 2006 (Grant)13Bosnia807/12/200404/861/ECthe balance ofDec. 2004 (Loan)1035Amendment of Decision 02/883/ECJune 2005 (Grant)1502/883/EC (Loan and Grant)Feb. 2006 (Loan)10Serbia and 07.12.200404/862/ECthe balance ofApr. 2005 (Loan)1540Montenegro703/825/ECDec. 2005 (Grant)25(ex FRY)Amendment of Decision 02/882/EC (Loan and Grant)Georgia        24.01.0606/41/EC33.5Aug. 2006 112211.5(Grant)Dec. 2006 11Kosovo 30.11.0606/880/EC50Sep. 2010 303020(Grant)Moldova16.04.0707/259/EC45Oct. 2007 2045(Grant)Jun. 200810Dec. 2008 15Lebanon1010.12.0707/860/EC80Dec. 2008 (Grant) 154040(Loan and Grant)June 2009 (Loan)25Georgia30.11.0909/889/EC46Dec. 2009 15.346(Grant)Jan. 2010 7.7Aug. 2010 23Armenia1130.11.0909/890/EC100June 2011 (Grant)14100(Loan and Grant)July 2011 (Loan)26Dec. 2011 (Grant)21Feb. 2012 (Loan)39 
 
34 

Bosnia and 30.11.0909/891/EC100Feb. 2013 50100Herzegovina (Loan)Oct. 2013 50Serbia 30.11.0909/892/EC200July 2011100100100(Loan)Ukraine 29.06.10646/2010/EU500Nov. 2014 250500(Loan)Apr. 2015250Moldova20.10.10938/2010/EU90Dec. 2010 4090(Grant)Sep. 2011 20Apr. 2012 30Georgia12.08.13778/2013/EU46Jan. 2015 (Grant)1346(Loan and Grant)Apr. 2015 (Loan)10May 2017 (Grant)10May 2017 (Loan)13Kyrgyz Republic 22.10.131025/2013/EU30Jun. 2015 (Grant)1030(Loan and Grant)Oct. 2015 (Loan)5Feb. 2016 (Grant)5Apr. 2016 (Loan)10Jordan11.12.131351/2013/EU180Feb. 2015100180(Loan)Oct. 201580Tunisia15.5.14534/2014/EU300May 2015100300(Loan)Dec. 2015100July 2017100Ukraine14.04.142014/215/EU1 000.0June 20145001 000.0(Loan)Dec. 2014500Ukraine15.04.152015/601/EU 1 800.0July 20156001 200.0 600.0(Loan)Apr. 2017600Tunisia06.07.162016/1112/EU 500.0Oct. 2017200 200.0 300.0(Loan)(ongoing)Jordan14.12.162016/2371/EU  200.0Oct. 2017100 100.0 100.0(Loan)(ongoing)Moldova13.09.172017/1565/EU 100.0 100.0(Loan and Grant)(ongoing)TOTAL11 549.09 407.02 142.0115499 407.02 142.0 
 
35 

4 Includes a loan principal amount of up to €50 million and grants of up to €48 million.5 Exceptional financial assistance.6 Includes a loan principal amount of €225 million and grants of €120 million.7 Includes a loan principal amount of €55 million and grants of €75 million.8 Includes a loan principal amount of €20 million and grants of €40 million.9 Includes a loan principal amount of €9 million and grants of €16 million.10 Includes a loan principal amount of €50 million and grants of €30 million.11 Includes a loan principal amount of €65 million and grants of €35 million.3 Includes a loan principal amount of up to €20 million and grants of up to €40 million.1 Assistance to Israel includes a loan principal amount of €160 million and grants of €27.5 million in the form of interest subsidies.2 Exceptional financial assistance, which includes a ceiling of €245 million for the loans and a ceiling of €130 million forthe grants. Out of the global amount of €375 million, maximum amounts of €58 million, €175 million and €95 million were actually agreed with the beneficiary countries 
 
 
 
 
Annex 2B: Status of effective disbursements by region at end-December 2017 

36 

Status of effective disbursements as of end-December 2017 (in millions of €) AuthorisationsDisbursementsCountry Date ofReference ofMaximumDates ofAmounts ofTotalsUndisbursedDecisionDecisionamountdisbursementsdisbursementsA. Current EU Member StatesBaltics23.11.9292/542/EC22013585(Loans) of which :    Estonia(40)March 199320(20)(20)    Latvia(80)March 199340(40)(40)    Lithuania(100)July 199350(75)(25)Aug. 199525Bulgaria24.06.9191/311/EC290Aug. 1991150290(Loan)March 1992140Bulgaria19.10.9292/511/EC110Dec. 199470110(Loan)Aug. 199640Bulgaria22.07.9797/472/EC250Feb. 1998125250(Loan)Dec. 1998125Bulgaria08.11.9999/731/EC100Dec. 199940100(Loan)Sep. 200060Czech and 25.02.9191/106/EC375March 1991185375Slovak Federal RepublicMarch 1992190(Loan)Hungary22.02.9090/83/EC870Apr. 1990350610260(Structural Adjustment Loan)Feb. 1991260Hungary24.06.9191/310/EC180Aug. 1991100180(Loan)Jan. 199380Romania22.07.9191/384/EC375Jan. 1992190375(Loan)Apr. 1992185Romania27.11.9292/551/EC80Feb. 19938080(Loan)Romania20.06.9494/369/EC125Nov. 199555125(Loan)Sep. 199740Dec. 199730Romania08.11.9999/732/EC200June 200010015050(Loan)July 200350EU MACRO-FINANCIAL AND EXCEPTIONAL FINANCIAL ASSISTANCE TO THIRD COUNTRIES BY REGION 
 
37 

Slovakia22.12.9494/939/EC130July 1996130(Loan)TOTAL A3 305.02 780.0 525.0B. Current Accession and Pre-Accession CountriesAlbania28.09.9292/482/EC70Dec. 19923570(Grant)Aug. 199335Albania28.11.9494/773/EC35June 19951535(Grant)Oct. 199620Albania22.04.9999/282/EC2020(Loan)Bosnia110.05.9999/325/EC60Dec. 1999 (Grant)1560(Loan and Grant)Dec. 1999 (Goan)1010.12.0101/899/ECDec. 2000 (Grant)10Dec. 2000 (Loan)10Dec. 2001 (Grant)15Former Yugoslav Republic 22.07.9797/471/EC40Sep. 19972540of Macedonia (Loan)Feb. 199815Former Yugoslav Republic08.11.9999/733/EC80Dec. 2000 (Grant)2098of Macedonia2Dec. 2000 (Loan)10(Loan and Grant)10.12.200101/900/EC18Dec. 2001 (Loan)12Dec. 2001 (Grant)10May 2003 (Grant)10June 2003 (Loan)10Dec. 2003 (Loan)18Dec. 2003 (Grant)8Kosovo319.02.0000/140/EC35Mar. 20002035(Grant)Aug. 200015Kosovo327.06.0101/511/EC30Sep. 20011530(Grant)Dec. 200215Montenegro322.05.0000/355/EC20Aug. 2000720(Grant Budgetary Support)Dec. 200013Serbia and Montenegro416.07.0101/549/EC345Oct. 2001 (Grant)35345(ex FRY)amended byOct. 2001 (Loan)225(Loan and Grant)10.12.200101/901/ECJan. 2002 (Grant)40Aug.2002 (Grant)45Serbia and Montenegro505.11.0202/882/EC130Dec. 2002 (Grant)3010525(ex FRY)Feb. 2003 (Loan)10Aug. 2003 (Grant)35Aug. 2003 (Loan)3025.11.0303/825/EC (7)70Dec. 2004 (Grant)10502007.12.0404/862/ECApr.  2005 (Loan)15Dec. 2005 (Grant)25modified byamended byamended by(Loan and Grant) 
 
38 

 
 
39 

Bosnia605.11.0202/883/EC60Feb. 2003 (Grant)1560Dec. 2003 (Grant)10Dec 2004 (Loan)1007.12.0404/861/ECJune 2005 (Grant)15Feb. 2006 (Loan)10Albania829.04.0404/580/EC25Nov. 2005 (Grant)325Mar. 2006 (Loan)9Jul. 2006 (Grant)13Kosovo  (Grant)30.11.0606/880/EC50Sep. 2010303020Bosnia and 30.11.0909/891/EC100Feb. 2013 50100Herzegovina (Loan)Oct. 2013 50Serbia 30.11.0909/892/EC200Jul-11100100100(Loan)TOTAL B1 388.01 203.0 185.0Neighbourhood East and Other Countries9Armenia, Georgia 17.11.9797/787/EC(375)(294.5)and Tajikistan10amended bydownsized to(Loans and Grants) 28.3.0000/244/ECAgreed amounts with the recipent countires:328294.533.5Armenia(58)Dec. 1998 (Loan)28(58)Dec. 1998 (Grant)8Dec.  1999 (Grant)4Feb. 2002 (Grant)5.5Dec. 2002 (Grant)5.5June 2004 (Grant)5.5Dec. 2005 (Grant)1.5Georgia(175)July 1998 (Loan)110(141,5)(33,5)Aug. 1998 (Grant)10Sep. 1999 (Grant)9Dec. 2001 (Grant)6Dec. 2004 (Grant)6.5Tajikistan(95)Mar. 2001 (Loan)60(95)Mar. 2001 (Grant)7Dec. 2001 (Grant)7Feb. 2003 (Grant)7May 2005 (Grant)7Oct .2006 (Grant)7Belarus10.04.9595/132/EC55Dec. 1995 303025(Loan)Moldova13.06.9494/346/EC45Dec. 1994 2545(Loan)Aug. 1995 20Moldova25.03.9696/242/EC15Dec. 1996 1515(Loan)Moldova10.07.0000/452/EC1515(Loan)19.12.0202/1006 ECamended by(Loan and Grant)(Loan and Grant) 
 
40 

19.12.0202/1006/EC1515Ukraine22.12.9494/940/EC85Dec. 1995 8585(Loan)Ukraine23.10.9595/442/EC200Aug. 1996 50200(Loan)Oct. 1996 50Sep. 1997 100Ukraine15.10.9898/592/EC150July 1999585892(Loan)12.07.0202/639/EC110May-14100110Nov. 2014 10Amendment of Decision 98/592/ECGeorgia        21.01.06      06/41/EC33.5Aug. 2006 112211.5(Grant)Dec. 2006 11Moldova       16.04.07     07/259/EC45     Oct. 2007 2045(Grant)June 200810Dec. 2008 15Georgia30.11.0909/889/EC46Dec. 2009 15.346(Grant)Jan. 2009 7.7Aug. 2010 23Armenia11 30.11.0909/890/EC100June 2011 (Grant)14100(Loan and Grant)July 2011 (Loan)26Dec. 2011 (Grant)21Feb. 2012 (Loan)39Ukraine 29.06.10646/2010/EU500Nov. 2014 250500(Loan)Apr. 2015 250Moldova 20.10.10938/2010/EU90Dec. 2010 4090(Grant)Sep. 2011 20Apr. 2012 30Georgia12.08.13778/2013/EU46Jan. 2015 (Grant)1346(Loan and Grant)Apr. 2015 (Loan)10May 2017 (Grant)10May 2017 (Loan)13Kyrgyz Republic 22.10.131025/2013/EU30Jun. 2015 (Grant)1030(Loan and Grant)Oct. 2015 (Loan)5Feb. 2016 (Grant)5Apr. 2016 (Loan)10Ukraine14.04.142014/215/EU1000June 20145001000(Loan)Dec. 2014500Ukraine15.04.152015/601/EU 1800July 20156001200600(Loan)Apr. 2017600Moldova13.09.172017/1565/EU100100(Loan and Grant)(ongoing)TOTAL C4 808.53 916.5 892.0Moldova(Grant)(Loan)Ukraine 
 
41 

D. Neighbourhood SouthIsrael1222.07.9191/408/EC187.5Mar. 1992187.5187.5(Structural Adjustment Soft Loan)Algeria23.09.9191/510/EC400Jan. 1992250400(Loan)Aug. 1994150Algeria22.12.9494/938/EC200Nov. 1995100100100(Loan)Lebanon1310.12.07     07/860/EC80Dec. 2008 (Grant)154040(Grant and Loan)June 2009 (Loan)25Jordan11.12.131351/2013/EU180Feb. 2015100180(Loan)Oct. 201580Tunisia15.5.14     534/2014/EU300May 2015100300(Loan)Dec. 2015100July 2017100Tunisia06.07.162016/1112/EU 500.0Oct. 2017200 200.0 300.0(Loan)(ongoing)Jordan14.12.162016/2371/EU  200.0Oct. 2017100 100.0 100.0(Loan)(ongoing)TOTAL D2 047.51 507.5 540.0TOTAL A+B+C+D11 549.09 407.02 142.01 Includes a loan principal amount of €20 million and grants of €40 million.2 Includes a loan principal amount of up to €50 million and grants of up to €48 million.3 Exceptional financial assistance.4 Includes a loan principal amount of €225 million and grants of €120 million.5 Includes a loan principal amount of €55 million and grants of €75 million.5 Includes a loan principal amount of €20 million and grants of €40 million.6 Includes a loan principal amount of €25 million and grants of €45 million.8 Includes a loan principal amount of €9 million and grants of €16 million.9 Other countries include Tajikistan and Kyrgyz Republic, to which expecptional MFA support was provided11 Includes a loan principal amount of €65 million and grants of €35 million.12 Assistance to Israel includes a loan principal amount of ECU 160 million and grants of ECU 27.5 million in the form of interest subsidies.13 Includes a loan principal amount of €50 million and grants of €30 million.10 Exceptional financial assistance, which includes a ceiling of €245 million for the loans and a ceiling of €130 million for the grants. Out of the total amount of €375 million, maximum amounts of €58 million, €175 million and €95 million were actually agreed with the beneficiary countries.  
 
Annex 3: MFA amounts authorised by year, 2005-2017 (EUR million) 

Chart 3A: MFA amounts authorised by year, 2005-2017 (EUR million) 

Chart 3B: MFA amounts authorised by region, 2005-2017 (%) 

42 

2005200620072008200920102011201220132014201520162017TotalBy regionAccession and Pre-Accession  50.0  300.0  350.0Neighbourhood East  33.5  45.0  146.0  590.0  46.0 1 000.0 1 800.0  100.0 3 760.5Neighbourhood South  80.0  180.0  300.0  700.0 1 260.0Other  30.0  30.0Total amounts authorised   83.5  125.0  0.0  446.0  590.0  256.0 1 300.0 1 800.0  700.0  100.0 5 400.5Loans  0.0  50.0  0.0  365.0  500.0  218.0 1 300.0 1 800.0  700.0  60.0 4 233.0Grants  83.5  75.0  0.0  81.0  90.0  38.0  40.0  367.5 
 
 
 
 
Annex 4: MFA amounts disbursed by year, 2005-2017 (EUR million) 

Chart 4A: MFA amounts disbursed by year, 2005-2017 (EUR million) 

Chart 4B: MFA amounts disbursed by region, 2005-2017 (%) 

43 

2005200620072008200920102011201220132014201520162017TotalBy regionAccession and Pre-Accession  58.0  32.0  30.0  100.0  100.0  320.0Neighbourhood East  8.5  29.0  20.0  25.0  15.3  70.7  81.0  69.0 1 360.0  873.0  623.0 3 174.5Neighbourhood South  15.0  25.0  380.0  400.0  820.0Other  15.0  15.0  30.0Total amounts disbursed  66.5  61.0  20.0  40.0  40.3  100.7  181.0  69.0  100.0 1 360.0 1 268.0  15.0 1 023.0 4 344.5Loans  15.0  19.0  0.0  0.0  25.0  0.0  126.0  39.0  100.0 1 360.0 1 245.0  10.0 1 013.0 3 952.0Grants  51.5  42.0  20.0  40.0  15.3  100.7  55.0  30.0  23.0  5.0  10.0  392.5