REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of macro-financial assistance to third countries in 2020
Date: 2021-07-08
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: European neighbourhood policy, coronavirus disease, economic stabilisation, epidemic, macro-financial assistance, macroeconomics, multiannual financial framework, structural adjustment, third country

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 8.7.2021  COM(2021) 375 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of macro-financial assistance to third countries in 2020 {SWD(2021) 178 final}  
 
 
CONTENTS 

1 

INTRODUCTION ..................................................................................................... 2 

2  MACRO-ECONOMIC DEVELOPMENTS IN PARTNER COUNTRIES ........ 3 

2.1 

2.2 

Eastern neighbourhood .................................................................................................... 3 

Southern neighbourhood ................................................................................................. 4 

2.3  Western Balkans .............................................................................................................. 4 

3  MACRO-FINANCIAL ASSISTANCE PROGRAMMES IN 2020 () .................. 5 

3.1 

Eastern neighbourhood .................................................................................................... 6 

  Georgia: MFA-III and MFA-COVID-19 ........................................................................ 6 

  Moldova: MFA and MFA-COVID-19 ............................................................................ 7 

  Ukraine: MFA-IV and MFA-COVID-19 ........................................................................ 7 

3.2 

Southern neighbourhood ................................................................................................. 8 

Jordan: MFA-III and MFA-COVID-19 .......................................................................... 8 

  Tunisia: MFA-COVID-19 ............................................................................................... 9 

3.3  Western Balkans ............................................................................................................ 10 

  Albania MFA-COVID-19 ............................................................................................. 10 

  Bosnia and Herzegovina MFA-COVID-19 ................................................................... 10 

  Kosovo* MFA-COVID-19 ............................................................................................ 11 

  Montenegro MFA-COVID-19 ...................................................................................... 11 

  North Macedonia MFA-COVID-19 .............................................................................. 11 

4  ENSURING THE PROPER USE OF MFA FUNDS: OPERATIONAL 
ASSESSMENTS, EX POST EVALUATIONS AND AUDITS ................................... 12 

4.1 

4.2 

Operational assessments ................................................................................................ 12 

Ex post evaluations ........................................................................................................ 12 

5  GENERAL DEVELOPMENTS RELATED TO THE MFA INSTRUMENT .. 13 

5.1 

Functioning of the MFA instrument .............................................................................. 13 

5.2  MFA in the 2021-2027 multiannual financial framework ............................................ 14 

6  LOOKING AHEAD –  MFA PROGRAMMES AND BUDGETARY 
SITUATION IN 2021 ..................................................................................................... 15 

*  This  designation  is  without  prejudice  to  positions  on  status,  and  is  in  line  with  UNSCR  1244/1999  and  the  ICJ 
Opinion on the Kosovo declaration of independence. 

1 

 
 
 
 
                                                           
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT 
AND THE COUNCIL 

on the implementation of macro-financial assistance to third countries in 2020 (1) 

INTRODUCTION 

1 
Macro-financial assistance, or MFA, is an EU financial instrument (2) extended to partner 
countries  experiencing  a  balance-of-payments  crisis.  Since  its  inception  in  1990,  MFA 
has helped to  improve macroeconomic and financial stability in  countries neighbouring 
or geographically close to the EU, while encouraging structural reforms. It complements 
and  is  conditional  on  a  non-precautionary  credit  arrangement  agreed  with  the 
International Monetary Fund (IMF). Relieving the partner country of pressure to address 
balance  of  payment  problems  allows  it  to  increase  its  fiscal  space,  improve  its  debt 
sustainability and focus on driving needed reforms. By smoothening the macroeconomic 
adjustment  path,  MFA  programmes  can  contribute  to  social  development,  giving  the 
country more time and scope to address the root causes of its crisis.   

MFA  most  often  takes  the  form  of  loans,  whose  funding  the  Commission  borrows  on 
capital  markets  and  on-lends  to  the  beneficiary  country  or,  in  some  cases,  it  takes  the 
form of grants financed by the EU budget, or a combination of loans and grants.  

MFA  is  released  in  instalments  and  only  if  specific  structural  reform  criteria  –  agreed 
with the country – are fulfilled. This underpins the implementation of strong adjustment 
and  reform  measures  aimed  at  strengthening  public  finance  systems  and  supporting 
sustainable  and  inclusive  growth  and  employment  creation.  Moreover,  a  pre-condition 
for  granting  MFA  is  the  beneficiary  country’s  application  of  effective  democratic 
mechanisms,  which includes having a multi‐ party parliamentary system and observing 
the rule of law, and the country’s guarantee that human rights will be respected. In this 
way, MFA complements regular EU cooperation assistance and contributes to the wider 
goal  of  preserving  stability  and  promoting  prosperity  beyond  the  EU.  MFA  has  been 
widely  recognised  as  an  effective  instrument  to  respond  to  crises,  enabling  the  EU  to 
intervene in a visible and flexible manner and with policy leverage (3). This is supported 
by  the  findings  of  several  independent  ex  post  evaluations  of  completed  MFA 
programmes (4). 

As a crisis instrument and unlike other EU external financial instruments, MFA does not 
provide  financial  support  on  a  regular,  programmable  basis.  For  this  reason,  under  the 

1 This report is based on information available up to May 2021. 

2 The legal basis for macro-financial assistance to non-EU countries other than developing countries is Article 212 of 
the Treaty on the Functioning of the European Union (TFEU). Article 213 TFEU may be used as a legal basis when the 
third country requires urgent financial assistance. 

3 MFA also complements other EU external actions or instruments for the neighbourhood and the Western Balkans, 
including budget support for which a total of 1 059 million EUR of grants was paid in the regions in 2020. The latest 
budget support report is available at: https://ec.europa.eu/international-partnerships/system/files/budget-support-trends-
and-results_en.pdf 

4  All  ex  post  evaluations  are  available  on  the  Commission’s  website:  https://ec.europa.eu/info/evaluation-reports-
economic-and-financial-affairs-policies-and-spending-activities_en 

2 

 
 
                                                           
2021-2027  multiannual  financial  framework  (MFF),  specific  MFA  programmes  will 
continue to be activated on the basis of ad hoc decisions. When they are based on Article 
212 TFEU, these are governed by the ordinary legislative procedure, which requires the 
approval of the European Parliament and the Council for each programme (or for several 
programmes  simultaneously  as  was  the  case  for  the  COVID-19  MFA  programmes 
adopted in May 2020).  

This  annual  report  is  prepared  in  accordance  with  the  Commission’s  information 
obligations  as  laid  down  in  the  various  decisions  by  the  European  Parliament  and  the 
Council  concerning  MFA  programmes.  It  is  accompanied  by  a  Commission  staff 
working  document,  which  provides  a  more  detailed  analysis  of  the  macroeconomic 
context and the implementation of individual MFA programmes. 

2  MACROECONOMIC DEVELOPMENTS IN PARTNER COUNTRIES 

The COVID-19 pandemic has spread widely across the globe, pushing most enlargement 
and neighbourhood partners into a recession in 2020. However, the duration and severity 
of  the  recession  differs  and  reflects,  beyond  the  evolution  of  the  pandemic  itself,  the 
partners’  economic  structures  as  well  as  their  ability  to  take  effective  counteracting 
measures. This section looks at the regional challenges faced by the EU’s neighbourhood 
and Western Balkans, while their economic performance is further assessed by country in 
the accompanying staff working document. 

2.1  Eastern neighbourhood 

The  COVID-19  pandemic  hit  the  economies  of  the  Eastern  neighbourhood  countries 
hard. Economic output contracted in all of them in 2020 due to a dual shock from tight 
lockdowns (with the exception of Belarus) that restrained domestic consumption and, to 
a  lesser  extent,  a  fall  in  external  demand.  The  domestic  response  in  the  form  of 
substantial  fiscal  packages  to  support  companies  and  jobs,  as  well  as  accommodative 
monetary  policy,  buffered  to  some  extent  the  shock.  International  support  was  also 
instrumental in helping most of the countries to address rising financing needs. All these 
measures  helped  contain  the  rise  in  unemployment  rates  in  most  countries.  Absent 
demand-side  pressures  and  in  the  context  of  lower  oil  prices,  consumer  price  inflation 
either  moderated  or  stayed  at  relatively  low  levels  for  most  of  2020.  As  a  result,  most 
central banks continued their monetary easing, even though in a slightly more moderate 
manner  in  countries  with  significant  currency  depreciation.  However,  the  easing  cycle 
came to  a halt (and in  some cases was even  reversed)  at  the end of the  year due to  re-
emerging inflationary pressures from import prices (food and fuel) and the pass-through 
from weaker currencies. Fiscal positions, which had witnessed a significant improvement 
over  previous  years,  have  weakened  considerably  since  the  start  of  2020.  Revenues 
stagnated  with 
to  support 
businesses/jobs  and  to  ensure  that  new,  urgent  healthcare  needs  were  met.  This,  along 
with weaker domestic currencies and lower nominal GDP, led to worsening public debt 
metrics.  On  the  external  front,  current  account  developments  were  mixed.  While  the 
pandemic led to strong import compression as a result of weakening demand and lower 
commodity  (in  particular  energy)  prices,  this  could  not  compensate  for  the  blow  to 
countries  with  a  sizable  tourist  sector  (Georgia)  or  to  the  ones  relying  heavily  on 
commodities (Azerbaijan). On the financing side, initial capital flight associated with the 
rising  uncertainty  was  cushioned  by  substantial  financial  assistance  from  international 
financial  institutions,  in  particular  the  IMF,  which  frontloaded  disbursements.  Market 
borrowing also resumed after the initial shock.  

the  recession,  while  expenditures  rose  considerably 

3 

 
2.2  Southern neighbourhood 

The  COVID-19  pandemic  has  severely  disrupted  economic  activity  in  the  Southern 
neighbourhood,  plunging  the  region  into  recession.  The  sharp  contraction  during  2020 
was due to the negative impact of domestic containment measures on consumption and 
investment, as well as the sizable fall in external demand from the region’s main trading 
partners.  The  slowdown  in  global  economic  activity  negatively  affected  foreign 
investment  flows,  remittances  and  tourism.  Timely  fiscal  stimulus  packages  and 
increasingly  accommodative  monetary  policies  have  partly  cushioned  the  economic 
shock, although this has led to sizable increases in fiscal deficits and debt-to-GDP ratios. 
The  deterioration  of  fiscal  positions  stems  both  from  lower  revenues  due  to  reduced 
activity and from increases in expenditure to address the health crisis, support businesses 
and  employment.  In  a  context  of  lower  energy  prices  and  restrained  demand,  inflation 
has  also  moderated.  On  the  external  front,  current  accounts  show  a  strong  reduction  of 
imports  due  to  faltering  demand  and  –  for  commodity  importers  –  lower  commodity 
prices  (notably  energy),  as  well  as  the  substantial  impact  on  exports  and  tourism  from 
depressed  global  demand  and  health-related  travel  restrictions.  Under  challenging 
financial market conditions, external partners and international financial institutions have 
provided  much-needed  financial  assistance  to  address  rising  financing  needs,  bolster 
liquidity  and  safeguard  stability  in  the  region.  Looking  ahead,  the  region  faces  a 
continued  challenging  period  with  increasingly  reduced  policy  space  to  address  the 
economic downturn. Amid unstable political conditions in many countries, the economic 
outlook  remains  uncertain  and  closely  linked  to  the  evolution  of  the  pandemic  and  the 
pace of the recovery in global economic activity. 

2.3  Western Balkans  

The outbreak of the COVID-19 pandemic in early March 2020 abruptly interrupted the 
growth momentum in the Western Balkans. Governments across the region implemented 
containment  measures  to  stop  the  spread  of  the  virus,  including  border  closures,  social 
distancing and lockdowns of parts of the economy. The disruptive effects of the crisis led 
to  strong  output  losses,  as  all  economies  suffered  from  the  contraction  in  household 
consumption and the collapse of exports and investment. Faltering imports and increased 
public consumption were the key mitigating factors, but they were not sufficient to offset 
negative  dynamics  of  other  expenditure  components.  In  line  with  declining  economic 
activity,  job  growth  was  negative,  but  as  labour  force  participation  also  decreased,  the 
rise  in  the  unemployment  rate  has  so  far  been  contained.  Inflation  dynamics  reflected 
conditions  of  weak  aggregate  demand  and  low  energy  prices,  with  all  Western  Balkan 
countries  experiencing  very 
in  2020. 
Disinflationary  pressures  combined  with  ample  global  liquidity  triggered  further 
monetary  accommodation  in  Western  Balkan  countries  with  an  independent  monetary 
policy.  Large-scale  fiscal  support  to  households  and  companies  to  combat  the  adverse 
impact of the crisis, combined with a sizeable drop in revenues, resulted in a sharp rise in 
budget  deficits  in  all  countries  in  the  region.  Along  with  a  fall  in  GDP,  this  led  to 
substantial  increases  in  the  public  debt-to-GDP  ratio  compared  to  end-2019.  On  the 
external front, current account deficits widened compared to a year before as a result of 
continued  strong  losses  in  services  exports,  such  as  tourism,  as  well  as,  in  most  cases, 
decreasing remittance inflows. Going forward, the economic outlook is surrounded by a 
high level of uncertainty, as the recovery in economic activity depends on the evolution 
of the pandemic, the latter closely linked to the pace of vaccination. 

low,  and  sometimes  negative, 

inflation 

4 

 
3  MACRO-FINANCIAL ASSISTANCE PROGRAMMES IN 2020 (5) 

2020 was an exceptional year in the thirty-year history of the MFA instrument. The year 
was firstly characterised by the conclusion of three MFA operations: Ukraine MFA-IV, 
Georgia  MFA-III  and  Moldova,  as  well  as  the  adoption  of  a  new,  follow-up  operation 
with Jordan (MFA-III). 

Then,  in  the  context  of  the  COVID-19  pandemic,  on  22  April  2020  the  Commission 
proposed  a  EUR 3 billion  package  of  MFA  operations  to  10  enlargement  and 
neighbourhood  partners  to  help  them  limit  the  economic  fallout  of  the  coronavirus 
pandemic6. The proposal came on top of the ‘Team Europe’ package, the EU’s targeted 
response  strategy  to  support  partner  countries’  efforts  in  tackling  the  coronavirus 
pandemic. Besides its unprecedented scale in terms of the number of countries covered 
and the financial amount, the decision (the ‘COVID-19 MFA package’) was adopted at 
record speed by the European Parliament and the Council on 25 May 20207.  

As part of this package, the EU agreed on the MFA loans being distributed as follows: 
the Republic of Albania (EUR 180 million), Bosnia and Herzegovina (EUR 250 million), 
Georgia  (EUR 150  million),  the  Hashemite  Kingdom  of  Jordan  (EUR  200  million), 
Kosovo  (EUR 100  million),  the  Republic  of  Moldova  (EUR 100  million),  Montenegro 
(EUR 60 million), the Republic of North Macedonia (EUR 160 million), the Republic of 
Tunisia (EUR 600 million) and Ukraine (EUR 1.2 billion). 

The  MFA  funds  come  in  the  form  of  loans  granted  on  highly  favourable  terms  to  help 
these partners cover their urgent financing needs. They are made available upon the entry 
into  force  of  the  Memorandum  of  Understanding  (MoU),  in  two  instalments,  for  12 
months. This is a shorter duration than what is usually the case (i.e. the usual 2.5 years) 
and reflects the urgency created by the pandemic and a wish to make support available 
fast, in a more flexible manner. The first instalment is made available once the MoU and 
Loan  Facility  Agreement  (LFA)  have  entered  into  force,  and  is  subject  to  the  general 
political pre-conditions for MFA (respect for effective democratic mechanisms, including 
a  multi-party  parliamentary  system,  the  rule  of  law  and  human  rights)  and  the  IMF 
programme  being  on  track  (where  applicable8).  The  second  instalment  is  in  addition 
conditional on the fulfilment of the agreed policy measures in the MoU.  

6 At the time of assessing the requests received, these 10 partners had fulfilled all eligibility criteria for MFA, including 
the political pre-condition and the link with an IMF programme. In 2020, the Commission also received MFA requests 
from Belarus and Armenia. However, assessments concluded that Belarus did not fulfil the political pre-condition of 
MFA (while the European Council has indicated its readiness to support a peaceful democratic transition in the country 
with  a  variety  of  instruments,  including  a  comprehensive  plan  of  economic  support  for  a  democratic  Belarus).  For 
Armenia, discussions were suspended in early 2021 following a very successful market borrowing of USD 750 million 
that largely covered Armenia’s short-term financing needs. 

7  Decision  (EU)  2020/701  of  the  European  Parliament  and  of  the  Council  of  25  May  2020  on  providing  macro‐
financial  assistance  to  enlargement  and  neighbourhood  partners  in  the  context  of  the  COVID‐ 19  pandemic,  
OJ L 165, 27.5.2020, p. 31–37 

8 MFA is always subject to a disbursing IMF programme. Beneficiary countries with an IMF Stand-by Arrangement or 
a  programme  under  the  Extended  Fund  Facility  (or  similar  arrangement  with  an  IMF-accompanied  adjustment  and 
reform programme) must in principle keep their IMF programme on track, as indicated by successful reviews. In the 
context of the COVID-19 crisis, MFA is exceptionally available also to countries that benefit from emergency funding 
from the IMF, such as through the Rapid Financing Instrument (RFI), which comes in a single IMF disbursement.  

5 

 
                                                           
 
 
 
Together  with  the  IMF’s  support,  the  MFA  funds  can  help  to  improve  macroeconomic 
stability  and  create  space  to  allow  resources  to  be  allocated  to  protect  citizens  and 
mitigate the socio-economic consequences of the pandemic. 

This MFA package, and its quick adoption by the European Parliament and the Council, 
is an important demonstration of the EU’s solidarity with partner countries at a time of 
unprecedented crisis.  

In 2020, a total of EUR 1,690 million (EUR 1,675 million in loans and EUR 15 million 
in  grants)  were  disbursed.  Table  1  provides  more  detail  on  the  disbursements  made  by 
country at the end of 2020. 

The implementation status of MFA programmes in 2020 (by region): 

3.1  Eastern neighbourhood 

 

Georgia: MFA-III and MFA-COVID-19 

The  MFA-III  operation  to  Georgia  launched  in  20189  was  successfully  completed  with 
the disbursement of the second and last tranche in November 2020. The amount of this 
tranche was EUR 25 million, including EUR 5 million in the form of grants and EUR 20 
million in loans. 

Following an official request from Georgia for a new MFA in the context of the COVID-
19  pandemic,  the  European  Parliament  and  the  Council  approved  the  COVID-19  MFA 
package in May 2020, including a new EUR 150 million MFA programme for Georgia. 
The  MoU  and  the  LFA  relating  to  this  MFA  operation  were  signed  and  ratified  by  the 
Georgian  Parliament  on  30  September  2020,  meaning  the  MFA  runs  until  September 
2021. 

In  accordance  with  the  MoU,  the  assistance  is  to  be  provided  in  two  instalments  of 
EUR 75  million  each.  The  first  instalment  was  subject  to  the  general  political  pre-
conditions for MFA and the IMF programme remaining on track. It was disbursed on 25 
November 2020. The second instalment will also be subject to the fulfilment of a set of 
policy conditions laid down in the MoU in the field of public procurement, the pension 
system,  company  law,  the  governance  of  state-owned  enterprises,  the  judicial  system, 
energy efficiency and the labour market.  

These  MFA  programmes  are  provided  in  conjunction  with  the  resources  from 
international financial institutions and bilateral donors, including the IMF, under its four-
year  Extended  Fund  Facility  (EFF)  programme  with  Georgia,  which  was  approved  in 
April  2017  and  augmented  in  2020  (to  a  total  of  approximately  EUR  690  million).  All 
reviews  under  this  programme  have  been  successfully  approved  by  the  IMF  Board, 
including the most recent one in April 2021.  

9 Decision (EU) 2018/598 of the European Parliament and of the Council of 18 April 2018 providing further macro-
financial assistance to Georgia, OJ L 103, 23.4.2018, p. 8–13 

6 

 
                                                           
  Moldova: MFA and MFA-COVID-19  

In  September  2017,  the  European  Council  and  the  European  Parliament  signed  the 
Decision  to  extend  EUR 100  million  in  macro-financial  assistance  to  Moldova10. 
Following the ratification of the MoU, the MFA entered into force in January 2018 for a 
period  of  two  and  a  half  years,  with  the  first  instalment  (EUR 30  million,  of  which 
EUR 10 million in grants) made in October 2019.  

The  decision  for  the  second  disbursement  was  made  on  9  June  2020,  preceded  by 
discussions related to political pre-conditions. A letter consisting of eight specific short-
term conditions to promote further reforms to help assess the political pre-conditions was 
handed  over  to  the  Moldovan  Prime  Minister  in  February  2020.  Following  a  positive 
assessment  of  the  conditions,  the  disbursement  proceeded  in  two  parts,  comprising  a 
EUR 20 million  loan on 16 July, and a EUR 10  million  grant  component on 1  August. 
The  third  and  final  tranche  of  the  MFA  was  cancelled  because  not  all  related  policy 
conditions were satisfied before the  end of the programme on 18 July 2020. The MFA 
was  linked  to  a  four-year  IMF  programme  of  Extended  Credit  Facility/Extended  Fund 
Facility in the amount of SDR 129.4 million (about USD 178.7 million). The final sixth 
review of the programme was successfully concluded in March 2020.  

In 2020, as part of the COVID-19 MFA package adopted in May 2020, the EU agreed on 
a  new  EUR 100  million  MFA  programme  for  Moldova,  complementing  the  IMF 
emergency programme of USD 235 million (adopted in April 2020). The MoU and LFA 
were  signed  and  ratified  by  the  Moldovan  Parliament  on  18  September  2020,  meaning 
the  MFA programme will be available until September 2021. 

The MFA is to be provided in two tranches of EUR 50 million each. The first instalment 
was  subject  to  the  general  political  pre-conditions  for  MFA  and  was  disbursed  on  25 
November 2020. The second instalment will also be subject to the fulfilment of a set of 
policy  conditions  laid  down  in  the  MoU.  The  programme’s  conditionality  focuses  on 
reforms in public finance management, good governance and the fight against corruption, 
and on improving the business climate. The second instalment can be released once these 
conditions are fulfilled.  

On 27 July 2020 the IMF and Moldova reached a new staff-level agreement for a three-
year  reform  programme  under  the  Extended  Credit  Facility/Extended  Fund  Facility 
(ECF/EFF)  worth  USD  558  million,  but  its  adoption  by  the  IMF  Executive  Board  was 
put on hold due to the political developments in  the country after the 2020 presidential 
elections.  

 

Ukraine: MFA-IV and MFA-COVID-19 

Following an official request from Ukraine, on 9 March 2018 the European Commission 
adopted a proposal for a Decision providing further MFA to Ukraine of EUR 1 billion in 
loans. The European Parliament and the Council adopted the Decision on 4 July 2018,11 

10 Decision (EU) 2017/1565 of the European Parliament and of the Council of 13 September 2017 on providing macro-
financial assistance to the Republic of Moldova, OJ L 242, 20.9.2017, p. 14–21 

11  Decision  (EU)  2018/947  of  the  European Parliament  and  of  the  Council of  4  July  2018  providing  further  macro-
financial assistance to Ukraine, OJ L 171 06.07.2018, p. 11. 

7 

 
                                                           
 
authorising  the  fourth  MFA  operation  in  Ukraine  since  201412.  The  first  tranche  of 
EUR 500  million  was  released  on  30 November  2018.  The  second  EUR 500  million 
tranche  was  disbursed  on  29  May  2020,  after  Ukraine  fulfilled  all  12  structural  policy 
measures to which it had committed.  

In 2020, as part of the COVID-19 MFA package adopted in May 2020, Ukraine became 
eligible for a fifth MFA programme of  EUR 1.2 billion. The MoU was negotiated during 
the  summer  and  entered  into  force  on  14  September  2020,  after  ratification  by  the 
national parliament  and signature by the President. The 12-month availability period of 
the  programme  thus  runs  until  September  2021.  The  structural  policy  conditionality  of 
the programme builds upon past MFA achivements and covers four areas: public finance 
management,  the  fight  against  corruption,  improvement  of  the  business  climate,  and 
sectoral policies and the governance of state-owned enterprises. 

The MFA is to be provided in two tranches of EUR 600 million each. Release of the first 
instalment was made conditional on the general political pre-conditions for MFA and the 
IMF  programme  remaining  on  track.  It  was  disbursed  on  9  December  2020.  With  that 
disbursement,  the  EU  has  lent  a  total  of  EUR 4.4  billion to  Ukraine  between  2014  and 
2020  through  five  consecutive  MFA  programmes.  The  disbursement  of  the  second 
tranche  is  conditioned  on  the  successful  implementation  of  the  eight  structural  policy 
measures to which Ukraine has committed in the MoU. 

This  COVID-19 MFA to Ukraine is  provided in conjunction  with  other resources from 
international  financial  institutions  and  bilateral  donors,  most  notably  the  IMF  under  its 
18-month  USD 5  billion  Stand-by  Arrangement  agreed  on  9  June  2020.  The  first 
USD 2.1  billion  were  disbursed  immediately.  The  first  programme  review  by  the  IMF, 
which  started  in  December  2020,  is  still  ongoing.  Its  conclusion  at  staff  level  and 
approval by the IMF Executive Board are conditioned on the fulfillment of crucial prior 
actions to strenghten the legal basis of the institutions fighting corruption. As is the case 
for  all  partner  countries  benefitting  from  MFA,  the  IMF  programme  being  on  track 
remains a general condition for any disbursement under the MFA. 

3.2  Southern neighbourhood 

 

Jordan: MFA-III and MFA-COVID-19  

Following the successful conclusion of MFA-II and in light of the fiscal challenges and 
extraordinary  circumstances  Jordan  was  facing  as  a  result  of  hosting  large  numbers  of 
Syrian  refugees,  the  country  submitted  a  request  for  further  MFA  in  July  2019.  In 
response, the Commission adopted a proposal on 6 September 2019 for a third MFA to 
Jordan in the amount of EUR 500 million in loans (MFA-III). The proposal was adopted 
by the co-legislators on 15 January 202013. The assistance is to be implemented in three 
instalments. 

12 The previous three operations totalled EUR 3.4 billion, of which EUR 2.8 billion was disbursed: EUR 1.6 billion in 
2014-2015 (under MFA I and II) and two tranches of EUR 600 million each in July 2015 and April 2017 (under MFA 
III). 

13 Decision (EU) 2020/33 of the European Parliament and of the Council of 15 January 2020 providing further macro-
financial assistance to the Hashemite Kingdom of Jordan, OJ L 14, 17.1.2020, p. 1–7 

8 

 
                                                           
Later  in  2020,  when  the  COVID-19  pandemic  hit  the  already  struggling  Jordanian 
economy,  the  authorities  requested  further  MFA  in  April  2020.  In  turn,  as  part  of  the 
COVID-19  MFA  package  adopted  in  May  2020,  the  EU  agreed  on  a  ‘top-up’  MFA 
programme  of  EUR  200  million  to  Jordan  (reinforcing  the  resources  made  available 
under MFA-III). The MoU and LFA (which oversee both MFA operations) entered into 
force on 2 October and 7 October 2020 respectively. The 12-month availability period of 
the  COVID-19  programme  therefore  runs  until  October  2021,  while  the  availability 
period of MFA-III runs until April 2023. The programme’s policy conditionality focuses 
primarily on improving public finance management, fighting corruption, and on reforms 
in the utilities sector, social and labour market policy, and on governance. 

The first instalment (EUR 250 million in loans) was conditional on the general political 
pre-conditions for MFA and the IMF programme remaining on track. It was disbursed on 
25  November  202014.  The  second  instalment  (EUR  250  million  in  loans)  and  the  third 
instalment  (EUR  200  million  in  loans)  are,  in  addition,  subject  to  the  specific  policy 
conditionality  agreed  between  Jordan  and  the  EU  in  the  MoU,  and  are  expected  to  be 
released once the policy conditions are met. 

These  MFA  programmes  are  provided  in  conjunction  with  the  resources  from 
international financial institutions and bilateral donors, including the IMF, under its four-
year EFF programme with Jordan approved on 25 March 2020 (EUR 1.2 billion, 270% 
of quota). In addition to this programme, on 20 May 2020 the IMF also made available 
around EUR 366 million  in  emergency  assistance to  Jordan under the Rapid  Financing 
Instrument  to  help  the  country  deal  with  the  impact  of  the  COVID-19  pandemic.  The 
IMF  Board  completed  the  first  review  under  the  EFF  in  December  2020,  releasing 
around USD 148 million immediately, and bringing total IMF disbursements to Jordan in 
2020 to USD 689 million. A staff level agreement on the second review was reached in 
March 2021, with the IMF noting that the ‘program remains firmly on track, with strong 
progress  on  key  reforms’.  Under  this  review,  the  authorities  have  requested  an 
augmentation  of  Fund  access  of  USD  200  million.  The  agreement  is  subject  to  the 
approval of the IMF’s Board.  

 

Tunisia: MFA-COVID-19 

As  part  of  the  COVID-19  MFA  package  adopted  in  May  2020,  the  EU  agreed  on  a 
EUR 600 million MFA programme for Tunisia. The MoU and the LFA were signed on 
24  November  2020,  ratified  by  the  Tunisian  Parliament  on  15  April  2021  and  entered 
into force on 11 May 2021, upon publication in  the Tunisian Official Gazette. The 12-
month  availability  period  of  the  programme  therefore  runs  until  May  2022.  The 
programme’s  policy  conditionality  focuses  primarily  on  four  thematic  areas:  public 
finance  management  and  civil  sector  reform;  reforms  in  state-owned  enterprises;  social 
protection; and investment climate.  

The  MFA  is  to  be  provided  in  two  tranches  of  EUR  300  million  each.  The  first 
instalment was subject to the general political pre-conditions for MFA and was disbursed 
on 1 June 2021. The second instalment is expected to be disbursed in the second half of 
2021, once the policy conditions are met.  

14 Disbursed under Decision (EU) 2020/33 (EUR 100 million) and Decision (EU) 2020/701 (EUR 150 million). 

9 

 
                                                           
The  assistance  is  meant  to  complement  resources  made  available  by  other  donors, 
including the IMF, under its EUR 685 million Rapid Financing Facility programme with 
Tunisia approved on 10 April 2020.  

3.3  Western Balkans  

 

Albania MFA-COVID-19 

Following  the  devastating  earthquakes  in  November  2019  and  the  challenges  posed  by 
the  COVID-19  pandemic,  Albania  oficially  requested  MFA  on  15  April  2020.  In 
response, as part of the COVID19-MFA package adopted in May 2020, the EU agreed on 
a EUR 180 million MFA programme for Albania. The MoU and the LFA were signed on 
3 November 2020 and entered into force on 3 November 2020 and on 26 January 2021 
respectively.  The  12-month  availability  period  of  the  MFA  therefore  runs  until 
November  2021.  The  programme’s  policy  conditions  aim  to  address  some  of  the 
weaknesses in public finance management, the financial sector, good governance and the 
fight against corruption and social protection policies. 

The MFA is to be provided in two tranches of EUR 90 million each. The first instalment 
was  subject  to  the  general  political  pre-conditions  for  MFA  and  was  disbursed  on  31 
March  2021.  The  second  instalment  is  expected  to  be  disbursed  in  the  second  half  of 
2021, once the policy conditions are met.  

The  assistance  is  meant  to  complement  resources  made  available  by  other  donors, 
including the IMF, under its Rapid Financing Facility programme with Albania of EUR 
174 million approved on 10 April 2020.  

 

Bosnia and Herzegovina MFA-COVID-19 

Following an official request for MFA from Bosnia and Herzegovina on 14 April 2020 in 
the  context  of  the  COVID-19  pandemic,  the  European  Parliament  and  the  Council 
approved the COVID-19 MFA package in May 2020, including a new EUR 250 million 
MFA programme for Bosnia and Herzegovina. The MoU and the LFA were signed on 15 
January  2021,  and  will  enter  into  force  once  the  ratification  process  in  the  country  is 
complete and upon publication in the Official Gazette. 

The MFA will be provided in two tranches of EUR 125 million each. The first instalment 
is subject to the general  political pre-conditions for MFA and  will be released after the 
Memorandum of Understanding enters into force. The second tranche will be disbursed 
not earlier than 3 months after the release of the first tranche and subject to the fulfilment 
of a set  of policy conditions.  The policy measures  fall into the following four thematic 
institution  building,  financial  sector  stability, 
areas:  economic  governance  and 
transparency  and  the  fight  against  corruption  and  a  better  functioning  of  the  labour 
market. 

The  assistance  is  meant  to  complement  resources  made  available  by  other  donors, 
including  the  IMF,  under  its  EUR 330  million  Rapid  Financing  Facility  programme 
approved on 9 April 2020.  

10 

 
 

Kosovo MFA-COVID-19 

Following an official request for MFA from Kosovo on 8 April 2020 in the context of the 
COVID-19 pandemic, the European Parliament and the Council approved the COVID-19 
MFA  package  in  May  2020,  including  a  new  EUR  100  million  MFA  programme  for 
Kosovo.  The  MoU  and  the  LFA  entered  into  force  on  8  September  2020.  The 
programme’s  policy  conditionality  focuses  primarily  on  strengthening  public  finance, 
enhancing financial stability, tackling informality, advancing the rule of law strategy, and 
improving employment prospects for young people.  

The MFA is to be provided in two tranches of EUR 50 million each. The first instalment 
was  subject  to  the  general  political  pre-conditions  for  MFA  and  was  disbursed  on  6 
October  2020.  The  second  and  final  instalment  was  disbursed  on  1  June  2021,  after 
Kosovo fulfilled the attached policy conditions.  

The  assistance  is  meant  to  complement  IMF  funds  (EUR  52  million)  under  the  Rapid 
Financing Facility (RFI) (50% of the Kosovo quota in the Fund), approved on 10 April 
2020.  

  Montenegro MFA-COVID-19 

Following  an  official  request  for  MFA  from  Montenegro  on  15  April  2020,  the  EU 
agreed on a EUR 60 million MFA programme for Montenegro in the form of loans, as 
part of the COVID-19 MFA package adopted in May 2020. The MoU and the LFA were 
signed  on  28  August  2020  and  entered  into  force  on  28  August  2020  and  on  15 
September  2020  respectively.  The  programme’s  policy  conditionality  focuses  primarily 
on  strengthening  public  finance  and  the  fight  against  corruption,  enhancing  financial 
stability, improving the business environment, and reforming social protection. 

The MFA is to be provided in two tranches of EUR 30 million each. The first instalment 
was  subject  to  the  general  political  pre-conditions  for  MFA  and  was  disbursed  on  6 
October  2020.  The  second  and  final  instalment  was  disbursed  on  1  June  2021,  after 
Montenegro fulfilled the attached policy conditions. 

The  assistance  is  meant  to  complement  resources  made  available  by  other  donors, 
including the IMF, under its EUR 75 million Rapid Financing Facility programme with 
Montenegro approved on 24 June 2020.  

 

North Macedonia MFA-COVID-19 

North  Macedonia’s  economic upswing came to  a sudden halt in 2020, as the pandemic 
hit  domestic  and  foreign  demand.  In  this  context,  and  following  an  official  request  for 
MFA from the authorities on 15 April 2020, the EU agreed on a EUR 160 million MFA 
programme  to  North  Macedonia  in  the  form  of  loans,  as  part  of  the  COVID19-MFA 
package  adopted  May  2020.  The  MoU  and  the  LFA  were  signed  on  17  July  2020  and 
entered  into  force  on  20  July  2020  and  on  15  September  2020  respectively.  The 
programme’s policy conditionality focuses primarily on strengthening public finance and 
the  fight  against  corruption,  enhancing  financial  stability,  improving  the  business 
environment, and reforming social protection. 

The MFA is to be provided in two tranches of EUR 80 million each. The first instalment 
was  subject  to  the  general  political  pre-conditions  for  MFA  and  was  disbursed  on  6 

11 

 
October 2020. The second and final instalment was disbursed on 1 June 2021, after North 
Macedonia fulfilled the attached policy conditions. 

The  assistance  is  meant  to  complement  resources  made  available  by  other  donors, 
including the IMF, under its EUR 176 million Rapid Financing Facility programme with 
North Macedonia approved on 10 April 2020.  

4 

ENSURING  THE  PROPER  USE  OF  MFA  FUNDS:  OPERATIONAL  ASSESSMENTS,  EX 
POST EVALUATIONS AND AUDITS 

4.1  Operational assessments 

In line with the requirements of the EU Financial Regulation, the Commission carries out 
operational  assessments  with  the  help  of  external  consultants  to  obtain  reasonable 
assurances  on  the  functioning  of  administrative  procedures  and  financial  circuits  in 
beneficiary countries. 

Operational  assessments  focus  on  public  financial  management  systems,  in  particular 
how  finance  ministries  and  central  banks  are  organised  and  what  procedures  they 
implement, and – more specifically – on how accounts receiving EU funds are managed. 
Special attention is also paid to the functioning, independence and work programmes of 
external  audit  institutions,  and  how  effective  their  controls  are.  Public  procurement 
procedures at central level are also examined. 

In 2020, 10 operational assessments were carried out in the context of the new COVID-
19 MFA programmes, as well as the new MFA-III Jordan, concluding that the financial 
circuits  and  procedures  in  the  partner  countries  are  sound  and  are  therefore  deemed 
appropriate for the purposes of MFA.  

4.2  Ex post evaluations  

In  line  with  the  EU  Financial  Regulation  and  the  corresponding  MFA  decisions,  the 
Commission  conducts  ex  post  evaluations15  after  completion  of  MFA  programmes  to 
assess their impact. The two main objectives of these evaluations are to: 

i. 

analyse  the  impact  of  MFA  on  the  beneficiary  country’s  economy,  and  in 
particular on the sustainability of its external position; and 

ii. 

assess the added value of the EU action. 

In  2020,  the  ex  post  evaluations  of  the  MFA-I  programme  in  Tunisia  and  the  MFA-III 
programme  in  Ukraine  were  both  completed.  The  accompanying  staff  working 
documents were published respectively in January and April 2021.  

  MFA I to Tunisia: ‘The evaluation found that MFA-I was effective in helping to 
fiscal 
improve  Tunisia’s  Balance  of  Payments,  as  well  as  supporting 
consolidation through highly concessional financial terms and policy conditions. 
The  MFA  covered  around  11.3%  of  the  residual  financing  gap  for  the  period 
2015-2016 and increased confidence in the Tunisian economy.’16  

15 All ex post evaluations are available on the Commission’s website: https://ec.europa.eu/info/evaluation-reports-
economic-and-financial-affairs-policies-and-spending-activities_en 

16  Available  at:  https://ec.europa.eu/info/evaluation-reports-economic-and-financial-affairs-policies-and-spending-
activities/ex-post-evaluation-macro-financial-assistance-mfa-operation-tunisia_en 

12 

 
                                                           
 
  MFA  III  to  Ukraine:  ‘The  magnitude  and  favorable  terms  of  the  third  MFA  to 
Ukraine allowed for fiscal savings, necessary for the implementation of structural 
reforms.  The  ability  of  the  EU  to  mobilise  and  coordinate  an  unprecedented 
amount of financial resources at a relatively quick speed was a key rationale for 
the  intervention,  in  a  time  when  Ukraine’s  financing  need  was  still  extremely 
high. MFA conditionality created a politically reinforcing effect that contributed 
to  the  mobilisation  of  Ukrainian  authorities  around  crucial  reforms.  The 
programme also added value through its confidence-boosting effect on the private 
sector.’17 

Lastly, in 2020 the Commission initiated a meta-evaluation of all the MFA programmes 
implemented in 2010-2020. The evaluation will assess the principles and characteristics 
governing  the  MFA  instrument  and  aim  to  provide  input  on  how  to  improve  its 
relevance, effectiveness, efficiency, value added and its ability to respond to the priorities 
of EU external action as well as the day-to-day management of MFA interventions. The 
meta-evaluation is expected to be completed in the autumn of 2021.  

5  GENERAL DEVELOPMENTS RELATED TO THE MFA INSTRUMENT 

5.1  Functioning of the MFA instrument  
The  2013  Joint  Declaration  of  the  European  Parliament  and  the  Council  on  MFA18 
frames the assistance as being of a macroeconomic and financial nature and clearly states 
that its aim is ‘to restore a sustainable external finance situation for eligible countries and 
territories  facing  external  financing  difficulties.’  For  MFA  to  be  successful  as  an 
‘emergency’  instrument,  it  is  therefore  important  to  mobilise  it  effectively  and  in  time.  

At  the  same  time,  it  has  been  noted  by  both  the  European  Court  of  Auditors  and  in  ex 
post evaluations that delays in adopting MFA decisions by the European Parliament and 
the  Council  within  the  ordinary  legislative  procedure  (OLP)  can  be  an  important 
shortcoming for an instrument that is meant to respond to a balance-of-payments crisis, 
and  as  a  consequence  ‘The  Commission  should  explore  with  its  co-legislators  the 
available options to accelerate the approval procedures of subsequent MFA programmes, 
particularly for emergency funding.’19. 

However, the Commission notes that the experience with the COVID-19 MFA package 
shows that the current setup of MFA can allow for both the flexibility and simplification 
necessary  for  a  swift  adoption.  The  Commission  worked  with  the  Parliament  and  the 
Council  to  agree  on  the  use  of  existing  urgency  procedures  which  allowed  for  the 
assistance to be adopted within one month of the Commission’s proposal and by both co-
legislators  (whereas  using  Article  213  TFEU,  in  a  situation  were  the  assistance  was 
urgently required, would have implied an adoption by the Council only). The European 

17 Available at : https://ec.europa.eu/info/evaluation-reports-economic-and-financial-affairs-policies-and-spending-
activities/ex-post-evaluation-mfa-operations-ukraine_en 

18 Joint Declaration by the European Parliament and the Council adopted together with the decision providing further 
macro-financial  assistance 
(EU)  2013/778  of  12  August  2013).  Available  at:  
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32013D0778&from=EN  

to  Georgia 

(Decision 

19 European Court of Auditors Special Report (No 03/2017) available at: 
https://www.eca.europa.eu/Lists/ECADocuments/SR17_3/SR_TUNISIA_EN.pdf. 

13 

 
 
 
                                                           
Parliament  invoked  a  specific  clause  (Rule  163)  in  their  Rules  of  Procedure,  which 
permitted to immediately adopt the Decision in Plenary, without having to go through the 
INTA  Committee,  as  is  regular  practice.  This  fast  adoption  process  was  the  result  of  a 
shared sense of urgency by all institutions in these extraordinarily challenging times.   

Thus, the Rules of Procedure of both the Council and the European Parliament provide 
for  an  accelerated  procedure  necessary  for  expeditious  adoption.  By  having  timely, 
constructive  contacts,  it  proved  possible  to  have  a  faster  adoption  process  under  the 
ordinary  legislative  procedure,  with  the  full  involvement  of  the  European  Paliament, 
which would not have been the case if the Commission would have proposed measures 
on the basis of Article 213 TFEU (applicable for cases where urgent financial assistance 
is required).  

As mentioned above, the overall functioning of the MFA instrument will also be assessed 
in  greater detail  in  the ongoing MFA meta-evaluation, expected to  be completed in  the 
second half of 2021.  

5.2  MFA in the 2021-2027 multiannual financial framework 

As  the  EU’s  neighbourhood  continues  to  experience  geopolitical  and  economic 
instability,  further  exacerbated  by  the  humanitarian  and  economic  fallout  from  the 
COVID-19 pandemic, the need for the EU to provide MFA is likely to remain high in the 
years to come.  

On 2 May 2018, the Commission adopted a Communication on the 2021-2027 MFF. For 
EU external action, the Commission proposed to streamline existing instruments to better 
communicate  what  the  EU  does,  avoid  overlaps,  make  processes  less  cumbersome  and 
increase efficiency and complementarity, all while better demonstrating the EU’s added 
value.  Several  instruments  under  the  2014-2020  MFF  were  integrated  into  the  new 
Neighbourhood,  Development  and  International  Cooperation  Instrument  (NDICI)  – 
‘Global  Europe’.  However,  MFA  will  remain  separate  from  the  NDICI,  and    specific 
MFA  programmes  will  continue  to  be  activated,  as  needed,  on  the  basis  of  separate 
decisions  on  the  basis  of  the  applicable  Treaty  legal  basis,  since  the  decision-making 
process of MFA programmes should remain distinct. MFA will thus normally continue to 
be  governed  by  the  ordinary  legislative  procedure  on  the  basis  of  Article  212  TFEU 
which  requires  the  Council  and  the  European  Parliament  to  approve  each  specific 
programme. 

MFA  loans  will  be  guaranteed  by  the  new  External  Action  Guarantee  (EAG)  that  was 
created by the NDICI. The EAG will cover guarantees in the private, sovereign and sub-
sovereign  sectors  (‘EFSD+’),  MFA-loans  as  well  as  external  Euratom  loans.  The  EAG 
will  be  backed  by  the  new  Common  Provisioning  Fund,  which  will  incorporate  the 
existing Guarantee Fund for external actions as well as the other Guarantee Funds in the 
external as well as the internal EU domain. The Commission proposed in May 2018 that 
the total volume of operations under the EAG should amount to up to EUR 60 billion, of 
which EUR 14 billion was earmarked for MFA loans to be provisioned at a rate of 9%, in 
line with  the mid-term  review of the previous MFF. The amount of the  EAG was then 
decreased following the decisions of the July 2020 European Council, and its breakdown 
further  modified  during  the  trilogues  amongst  the  co-legislators  and  the  Commission. 
The new ‘Global Europe’ instrument is expected to enter into force in June 2021, after its 
formal adoption by the Council and the Parliament. 

14 

 
6 

LOOKING AHEAD –  MFA PROGRAMMES AND BUDGETARY SITUATION IN 2021   

2021  will  first  and  foremost  be  characterised  by  the  implementation  of  the  10  ongoing 
MFA  programmes,  as  described  above.  These  include  disbursement  of  the  first 
instalment for the remaining two countries in the COVID-19 MFA package (i.e. Bosnia 
and Herzegovina and Tunisia), as well as the disbursement of the second instalment for 
all  beneficiary  countries,  provided  that  the  conditions  are  satisfactory  fulfilled. 
Furthermore,  depending  on  the  progress  with  policy  reforms,  the  third  and  final 
instalment for Jordan MFA-III could also be disbursed during 2021.  

The  Commission  stands  ready  to  consider  any  forthcoming  requests  for  MFA,  and  if 
appropriate,  will  propose  new  and/or  follow-up  MFA  programmes  to  the  eligible 
partners.   

Table  1  provides  an  overview  of  commitments  and  payments  of  MFA  grants  and  the 
disbursement  of  MFA 
loans  for  2019,  2020  and  (provisionally)  2021.  Total 
disbursements of MFA loans are expected to amount to EUR 2,365 million in 2021.  

15 

 
 
 
Table 1:  

Commitments and payments for MFA grants and disbursements of MFA loans 
2019-2021 (EUR) 

16 

201920202021 (provisional)27 000 00020 000 00056 449 042Operational assessments, Ex post evaluations125 900293 900500 000Other possible MFA operations --TBDCommitments, total125 900293 900TBDUncommitted budget allocations26 874 10019 706 100TBDPayment appropriations for grants in the budget27 000 00027 000 00026 000 000Operational assessments, Ex post evaluations304 949284 600362 400MFA Georgia II (completed)-5 000 000-MFA Moldova (completed)10 000 00010 000 000-Other possible MFA operations--TBDPayments, total10 304 94915 284 600TBDUnused allocations for grant payments16 695 05111 715 400TBDDisbursements of MFA loansMFA Georgia II (completed)-20 000 000-MFA Moldova (completed)20 000 00020 000 000-MFA Ukraine IV (completed)-500 000 000-MFA Jordan II (completed)100 000 000--MFA Jordan III 100 000 000400 000 000MFA Tunisia II (completed)300 000 000--COVID-19 MFA operations:MFA Georgia75 000 00075 000 000MFA Moldova50 000 00050 000 000MFA Ukraine600 000 000600 000 000MFA Jordan150 000 00050 000 000MFA Tunisia -600 000 000MFA Albania-180 000 000MFA Bosnia and Herzegovina -250 000 000MFA Kosovo50 000 00050 000 000MFA Montenegro30 000 00030 000 000MFA North Macedonia 80 000 00080 000 000Disbursements of MFA loans, total420 000 0001 675 000 0002 365 000 000Commitment appropriations for grants in the budget