REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of macro-financial assistance to third countries in 2022
Date: 2023-07-11
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: European neighbourhood policy, economic stabilisation, macro-financial assistance, macroeconomics, multiannual financial framework, structural adjustment, third country

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 11.7.2023  COM(2023) 409 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of macro-financial assistance to third countries in 2022 {SWD(2023) 244 final}  
 
 
CONTENTS 

1 

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

2  MACROECONOMIC DEVELOPMENTS IN PARTNER COUNTRIES ......... 3 

2.1 

2.2 

Eastern Partnership .......................................................................................................... 4 

Southern Neighbourhood ................................................................................................ 5 

2.3  Western Balkans .............................................................................................................. 6 

3  MACRO-FINANCIAL ASSISTANCE OPERATIONS IN 2022 ......................... 6 

3.1 

Eastern Partnership .......................................................................................................... 8 

  Moldova: new MFA operation ........................................................................................ 8 

  Ukraine: emergency MFA ............................................................................................... 8 

  Ukraine: exceptional MFA .............................................................................................. 9 

  Ukraine: MFA+ ............................................................................................................. 10 

3.2 

Southern Neighbourhood .............................................................................................. 11 

 

Jordan: MFA-III ............................................................................................................. 11 

  Tunisia: COVID-19 MFA .............................................................................................. 12 

3.3  Western Balkans ............................................................................................................ 12 

  Bosnia and Herzegovina MFA-COVID-19 ................................................................... 12 

4  ENSURING THE PROPER USE OF MFA FUNDS: OPERATIONAL 
ASSESSMENTS, EX POST EVALUATIONS AND AUDITS ................................... 13 

4.1 

4.2 

Operational assessments ................................................................................................ 13 

Ex post evaluations ........................................................................................................ 13 

5  GENERAL DEVELOPMENTS RELATED TO THE MFA INSTRUMENT .. 15 

5.1 

Functioning of the MFA instrument .............................................................................. 15 

5.2  MFA in the 2021-2027 multiannual financial framework ............................................ 15 

6  LOOKING AHEAD –  MFA OPERATIONS AND BUDGETARY SITUATION 
IN 2023 ............................................................................................................................. 17 

1 

 
 
 
 
 
 
 
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT 
AND THE COUNCIL 

on the implementation of macro-financial assistance to third countries in 2022 (1) 

1 

INTRODUCTION 

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  usually 
complements  and is  conditional on a non-precautionary credit arrangement  agreed with 
the  International  Monetary  Fund  (IMF),  but  an  exception  from  this  preconditon  was 
made  in  the  set-up  of  the  exceptional  support  provided  to  Ukraine  following  Russia’s 
full-scale invasion in  February 2022. Relieving the partner country of  some 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  operations  can  have  positive  social  impacts, 
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 lends on to the beneficiary country on the same terms. In some cases, 
it  takes  the  form  of  grants  financed  by  the  EU  budget.  Sometimes,  it  can  be  a 
combination of loans and grants.  

MFA  is  released  in  instalments  and  only  if  all  the  specific  structural  reform  criteria  - 
agreed  with  the  country  -  are  fulfilled.  This  underpins  the  implementation  of  strong 
adjustment  and  reform  measures  aimed  at  addressing  the  root  causes  of  the  underlying 
crisis,  strengthening  public  finance  systems  and  supporting  sustainable  and  inclusive 
growth  and  employment  creation.  Moreover,  a  precondition  for  granting  MFA  is  the 
beneficiary  country’s  adherence  to  effective  democratic  mechanisms,  which  includes 
having  a  multi‐party  parliamentary  system  and  observing  the  rule  of  law,  and  the 
country’s  respect  of  human  rights.  In  this  way,  MFA  complements  regular  EU 
cooperation  assistance  and  contributes  to  the  wider  goal  of  preserving  stability  and 
promoting  prosperity  and  EU  core  values  beyond  its  borders.  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 

1 This report is based on information available up to April 2023.  

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 EUR 1 384 million in grants was provided to the regions in 2022. The 
latest budget support report is available at: https://international-partnerships.ec.europa.eu/system/files/2022-10/budget-
support-trends-and-results-2022_en.pdf 

2 

 
 
 
                                                           
findings of several independent evaluations of completed MFA operations (4) as well as 
the recent meta-evaluation of the last decade of operations (5). 

Following  the  onset  of  Russia’s  unjustified  war  of  aggression  against  Ukraine,  2022 
proved  to  be  an  exceptional  year  for  MFA,  in  that  it  forcefully  demonstrated  its 
continued  relevance  and  flexibility  in  allowing  the  EU  to  extend  sizeable  short-term 
financial  support  to  Ukraine  under  extraordinary  circumstances,  while  also  supporting 
other  countries  in  the  EU  Neighbourhood  that  have  been  strongly  affected  by  the 
economic  fallout  of  this  war.  These  operations  and  their  budgetary  implications  are 
therefore among the key issues reported on in this annual report.  

The  2022  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  operations  (6).  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 operations. 

2  MACROECONOMIC DEVELOPMENTS IN PARTNER COUNTRIES 

In  2022,  the  economic  developments  in  the  EU  Neighbourhood  and  enlargement 
countries  were  directly  and  indirectly  impacted  by  Russia’s  war  of  aggression  against 
Ukraine.  While  the  Eastern  Partnership  (EaP)  countries  were  most  directly  affected  by 
the  resulting  spillovers,  the  repercussions  were  also  felt  in  the  EU  Southern 
Neighbourhood and in the Western Balkans.  

In  the  EaP  countries,  the  Russian  war  of  aggression  against  Ukraine  led  to  a  currency 
depreciation  and  strong  pressures  on  food  and  energy  prices.  Consumer  and  business 
confidence has also been heavily affected, and significant migration flows in the region 
have reinforced inflationary pressures  in  some countries The Republic of Moldova was 
most  negativey  affected  as  inflation  surged  (beyond  the  levels  in  Ukraine),  while 
consumer and business confidence took a hit. In contrast, Armenia and Georgia benefited 
from the sizeable flows of Russian citizens and the associated financial transfers as well 
as the change in transport routes due to the war.  

In  the  Southern  Neighbourhood,  despite  overall  low  trade  exposure,  pressure  took  the 
form of rising food prices and decreasing food security  (some countries rely heavily on 
Russia and Ukraine for their wheat imports, a critical and highly subsidised staple) and of 
rising  (though  often  highly  subsidised)  energy  prices.  Nonetheless,  all  Southern 
Neighbourhood  countries  -  except  for  Lebanon  -  continued  an  economic  expansion  in 
2022.  

In the Western Balkans, sustained increases in energy, food and transport prices fuelled a 
further acceleration in inflation, reducing households’ real disposable income and private 
consumption. Disruptions in international supply chains and reduced demand due to the 
lower  growth  prospects  of  major  trading  partners,  including  the  EU,  have  further 

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

5  COM(2023)  0016,  final;  Commission  Staff  Working  document  Evaluation  of  Macro  financial  assistance  to  third 
countries (Meta-evaluation of operations for 2010-2020). 

6 Decision (EU) 2022/313; Decision (EU) 2022/1201; Decision (EU) 2022/1628; Decision (EU) 2022/2463; Decision 
(EU) 2022/563; Decision (EU) 2020/701; Decision (EU) 2020/33. 

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burdened  the  economic  outlook  for  all  three  regions,  including  for  exports  and  foreign 
direct investment, thus exacerbating existing external imbalances. 

This section examines the regional challenges faced by the EU Neighbourhood countries 
and  the  Western  Balkans,  while  their  economic  performance  is  further  assessed  on  a 
country-by-country basis in the accompanying staff working document.  

2.1  Eastern Partnership  

In  2022,  economic  developments  in  all  Eastern  Partnership  countries  were  shaped  by 
Russia’s  war  against  Ukraine,  while  the  effects  of  the  pandemic  gradually  faded. 
Economic developments diverged strongly between these countries, however. On the one 
hand, economic output collapsed (by around -30% in Ukraine) or contracted considerably  
(a  4.7%  drop  in  GDP  in  Belarus  and  a  5.9%  drop  in  Moldova).  These  countries  were 
affected either directly (Ukraine suffering from Russia’s brutal war of aggression and its 
devastating  humanitarian,  social  and  economic  consequences,  including  via  a  massive 
loss of physical capital and infrastructure  destruction as well as a significant amount of 
international and internal refugees) or through spillover effects that dented consumer and 
investor confidence. On the other hand, economic activity in the three Caucasus countries 
reached impressive heights. For Armenia and Georgia,  with GDP growth of 12.6% and 
10.1% respectively, this reflected an inflow of Russian citizens and businesses following 
the  start  of  the  Russian  war  of  aggression  and  an  accompanying  surge  in  financial 
transfers.  Azerbaijan (GDP  growth  of 4.6%)  also  benefited  from  higher  financial flows 
from Russia and positive terms-of-trade effects on higher energy prices, as well as from 
the ongoing post-pandemic recovery. 

High  inflation,  in  many  cases  at  levels  not  seen  in  decades,  remained  a  common 
characteristic of the Eastern Partnership in 2022. Consumer price growth reached its peak 
(reaching double digits in all countries) in the middle of the year as a result of the price 
shock  (namely  in  relation  to  food  and  energy)  associated  with  the  Russian  war  of 
aggression  against Ukraine  and the weakening  of the local  currencies in  the immediate 
aftermath  of  the  conflict.  The  significant  migration  flows  in  the  region  also  reinforced 
inflationary  pressures  in  some  of  the  countries.  To  tame  inflation,  central  banks 
continued their monetary tightening efforts in 2022 even if the pace of rate hikes eased 
considerably as of mid-year, following the stabilisation of global commodity prices and 
local currencies. 

Benefiting  from  the  robust  economic  activity,  the  three  Caucasus  countries  reported 
strong  fiscal  outcomes  in  2022  as  the  budget  deficits  came  in  below  targets,  while  the 
public  debt-to-GDP  ratios  decreased  considerably.  In  contrast,  amid  steep  increases  - 
notably in defence spending - and a collapse of revenues from the war-stricken domestic 
economy,  Ukraine  recorded  a  huge  budget  deficit  that  was  mainly  financed  by 
international partners, notably the EU. On the external front, there were diverging trends 
as well. The three Caucasus countries recorded strong growth in trade, partly related to 
changes in transport routes triggered by the war and, in the case of Azerbaijan, the surge 
of global energy prices. In contrast, trade collapsed in Ukraine due to the destruction of 
capital  stock  by  Russia  and  blockades  of  key  trade  routes,  notably  the  Black  Sea,  by 
Russia. The comprehensive Western sanctions against Belarus contributed to the decline 
in  the  country’s  trade.  On  the  positive  side,  remittances  to  the  Eastern  neighbours 
remained  surprisingly  resilient  to  the  war  and  contributed  to  narrowing  the  current 
account deficits, thus supporting - along with official financing - the ongoing build-up of 
international reserves in most of the countries in the region. 

4 

 
The  short-term  outlook  for  the  region  is  that  it  will  likely  continue  to  be  shaped  by 
Russia’s  war  of  aggression  in  Ukraine.  Another  key  factor  is  a  potential  weakening  of 
global  external  demand  due  to  the  ongoing  monetary  tightening  by  key  central  banks. 
This could be partly offset by slightly more accomodative fiscal and monetary policies in 
the Eastern neighbours as inflation has started to gradually slow down. 

2.2  Southern Neighbourhood 
Despite  the  repercussions  of  Russia’s  war  of  aggression  against  Ukraine  in  terms  of 
higher  commodity  prices  and  inflation  causing  a  tightening  of  financing  conditions,  all 
Southern Neighbourhood countries - except for Lebanon - continued to see an economic 
expansion in 2022. Despite the economic impact of the pandemic tapering off, economic 
growth  slowed  and  stood  below  pre-war  expectations,  in  particular  in  the  quarter 
following  the  outbreak  of  the  war.  Preliminary  data  suggest  that  real  GDP  growth 
reached between 2.0% in Morocco and 7.7% in Israel in the first half of 2022.  

Economic  growth  was  driven  by  the  continued  recovery  of  the  service  sector,  in 
particular  tourism,  hospitality,  restaurant  and  transport  services.  Energy  exporters’ 
expansion  benefited  in  particular  from  robust  demand  and  high  international  energy 
prices  following  Russia’s  war  against  Ukraine  and  (Western)  sanctions  against  Russia. 
Unemployment  levelled  off  to  pre-pandemic  levels  in  most  countries,  on  the  back  of 
recovering  economic  activity.  Consumer  price  inflation  accelerated  in  all  countries, 
driven by international energy and food prices. In response to the rise in inflation, central 
banks  tightened  the  monetary  stance  by  hiking  interest  rates  in  particular  in  Q2-2022, 
after having maintained their accommodative policy stance in 2021 and early 2022. 

After  the  strong  deterioration  of  fiscal  balances  during  the  pandemic  in  2020,  fiscal 
deficits narrowed in all countries. Revenues, in particular tax income, increased with the 
recovery  of  economic  activity  and  on  the  back  of  rising  inflation,  while  expenditures, 
notably on the social and health sectors, generally decreased from their 2020 peaks. This 
was partly offset by pressures on fiscal expenditures from the fallout of the Russia’s war 
against  Ukraine,  as  most  southern  neighbours  subsidise  wheat  and/or  fuel.  In  addition, 
public  debt  remained  at  record  levels  as  a  consequence  of  substantial  financing  needs 
during  the  pandemic.  Current  account  dynamics  vary  strongly  across  the  Southern 
Neighbourhood,  given  the  wide  differences  in  economic  structures  and  trade  profiles. 
Driven  by  global  commodity  price  increases  following  Russia’s  war  against  Ukraine, 
price  hikes  for  fuel  and  gas  have  put  pressure  on  the  current  accounts  of  all  energy 
importers. The recovery of the tourism sector and remittances had mitigating effects for 
most  countries.  The  region  also  continued  to  benefit  from  external  support  from 
international institutional lenders.  

Russia’s  war  of  aggression  against  Ukraine  also  impacts  the  outlook  of  the  Southern 
Neighbourhood,  albeit  to  a  lesser  degree  than  in  the  EaP.  Its  fallout  implies  significant 
downside  risks  to  the  ongoing  recovery,  as  the  southern  neighbours  continue  to  be 
affected by higher food, energy and other commodity prices in particular, which drive up 
inflation and hit domestic consumption while adding to the pressure on public budgets. 
Disruptions of supply chains and trade flows have already put huge pressure on markets, 
public finances, producers and consumers across the region, in particular on the countries 
depended on the grain export from Ukraine and Russia, such as Egypt, Jordan, Lebanon, 
Libya, Morocco and Tunisia. 

5 

 
2.3  Western Balkans  

The  economic  rebound  in  the  Western  Balkans  moderated  significantly  in  2022  due  to 
the  fallout  from  Russia’s  war  of  aggression  against  Ukraine,  the  induced  energy  crisis 
and ensuing high inflation. Despite the reopening of the economies after the COVID-19 
pandemic and a rebound in tourism, output growth slowed further in the third quarter of 
2022, with the region’s GDP growing by 2.1% y-o-y, compared to 4.3% in the previous 
three months. Private consumption and exports remained the key  growth drivers across 
the  region  while  investment  showed  a  mixed  performance,  with  year-on-year  declines 
recorded  in  some  of  the  countries.  Public  consumption  contracted  in  some  countries, 
partly reflecting the gradual withdrawal of pandemic-related support measures.  

Job  growth  turned  marginally  negative  in  the  Western  Balkans  in  Q3-2022  compared 
with  the  previous  year.  Despite  this,  unemployment  rates  fell  or  remained  unchanged, 
reflecting a decrease in labour force participation in some countries. Strong increases in 
energy,  food  and  transport  prices  fuelled  a  significant  acceleration  of  consumer  price 
inflation  in  all  Western  Balkan  countries  in  2022,  which  prompted  the  region’s  central 
banks  with  monetary  autonomy  to  raise  their  key  policy  rates.  Helped  by  decelerating 
food and energy prices, headline inflation levelled out somewhat in most countries in the 
last months of 2022. 

The  continued  economic  recovery  and  high  inflation  supported  the  growth  of  budget 
revenues, and fiscal balances increased further across the Western Balkans in the first 11 
months  of  2022.  In  parallel,  the  public  debt-to-GDP  ratio  decreased  in  all  countries 
compared  to  end-2021,  partly  reflecting  the  rise  in  nominal  GDP.  Between  September 
2021 and September 2022, the region’s current account deficit stood at 6.8% of GDP, the 
second-highest  level  since  Q3-2020.  This  was  mainly  due  to  the  energy-balance-driven 
increase  in  merchandise  trade  deficits  which  outweighed  the  strong  rebound  noted  in 
exports of services and the higher remittances inflows. 

There  are  significant  downside  risks  to  the  Western  Balkans’  economic  outlook  due  to 
Russia’s continued war of aggression against Ukraine, mainly through the impact of high 
inflation  on  real  disposable  income  and  consumption,  as  well  as  tighter  financial 
conditions.  

3  MACRO-FINANCIAL ASSISTANCE OPERATIONS IN 2022 

In  the  spring  of  2022,  the  two  remaining  MFA  operations  under  the  COVID-19  MFA 
package  (7)  were  completed.  While  Tunisia  received  the  disbursement  of  the  final 
instalment  on  25 May  2022,  the  second  instalment  for  Bosnia  and  Herzegovina  was 
cancelled, due to seven out of nine policy conditions being unfulfilled.  

With  the  completion  of  the  COVID-19  MFA  package,  in  2022  the  focus  shifted  to 
finding ways of providing new financial assistance to Ukraine, given Russia’s continued 
war of aggression, in a reasonably safe manner (recognising the exceptional uncertainty 
surrounding the operations and  given that the usual precondition of the MFA operation 
being backed by a disbursing fully-fledged IMF programme was not fulfilled). Following 
the  onset  of  the  war,  on  28  February  2022,  the  European  Parliament  and  the  Council 
adopted a decision to provide emergency macro-financial assistance to Ukraine for up to 

7 Decision (EU) 2020/701 providing  EUR  3 billion in MFA loans to  10 enlargement and neighbourhood 
countries.  

6 

 
                                                           
EUR 1.2 billion in loans, thereby authorising the sixth MFA operation in Ukraine since 
2014.  

In  a  situation  of  intensified  and  acute  funding  needs  for  Ukraine,  in  the  second  half  of 
2022, the EU adopted two additional exceptional MFA operations, which authorised the 
disbursement of a further EUR 6 billion to the country by December 2022. For the two 
exceptional MFA operations, the provisioning rate was increased from 9%, as stipulated 
by the Neighbourhood, Development and International Cooperation Instrument - ‘Global 
Europe’ Regulation (NDICI Regulation), to 70% (at least temporarily, with the adequacy 
of  the  provisioning  rate  to  be  reviewed  bi-annually  in  view  of  the  uncertainty 
surrounding  the  economic  situation  and  outlook  in  Ukraine  as  long  as  the  war  is 
ongoing).  

Less than 2 months following the request from the European Council on 20-21 October 
to  establish  a  more  structural  solution  for  providing  assistance  to  Ukraine  in  2023,  the 
‘MFA+’ Regulation entered into force on 17 December. This new instrument will ensure 
more predictable, continuous, orderly and timely financing to enable Ukraine to cover a 
good part of its immediate funding needs, the rehabilitation of critical infrastructure and 
initial support towards post-war reconstruction, with a view to supporting the country on 
its path towards European integration.  

Moreover,  as  reflected  in  the  name  ‘MFA+’,  this  new  instrument  introduces  certain 
changes  to  standard  MFA  practices  to  adapt  it  to  the  extraordinary  circumstances  of 
providing  support  to  a  country  at  war,  notably  to  high  uncertainty,  risks  and  flexibility 
needs. Changes include increased concessionality of the loans (higher maturity of up to 
35  years  with  a  ten-year  grace  period  and  interest  rate  subsidy),  flexibility  with  the 
strucutral  policy  conditionality  (satisfactory  progress  towards  implementation  required 
only,  for  all  disbursements  bar  the  last),  continued  de-linking  from  a  disbursing  IMF 
programme and enhanced reporting requirements. These elements are explained in more 
detail  in  Section  3.1  below  and  in  the  accompanying  staff  working  document.  The  20 
targeted  policy  conditions  underpinning  this  operation  have  been  carefully  designed  to 
ensure their relevance and feasibility in the current situation. They cover the four areas of 
macro-financial  stability,  structural  reforms  and  good  governance,  rule  of  law,  and 
energy. 

In  November  2021,  following  a  gas  crisis  in  Moldova,  which  heavily  impacted  the 
economy  and  fuelled  its  financing  needs,  the  authorities  submitted  a  request  for  a  new 
MFA. In response, the EU agreed on a new operation for Moldova of EUR 150 million, 
including  EUR  120  million  in  loans  and  EUR  30  million  in  grants.  The  operation  is 
underpinned by an economic reform programme covering  15 actions on the rule of law 
and  the  fight  against  corruption,  public  finance  management  and  financial  sector 
governance,  improving  the  business  environment  and  energy  sector  reforms.  The  first 
and second instalment were successfully released in July 2022 and March 2023.  

The  Moldovan  economy  has  been  particularly  heavily  impacted  by  Russia’s  war  of 
aggression against Ukraine, which has contributed to its higher financing needs, further 
amplified by the ongoing energy crisis. In light of this, the authorities requested further 
international  support.  On  10  November  2022,  President  von  der  Leyen  announced  an 
additional  financial  support  package  for  Moldova  of  EUR  250  million,  to  be  partly 
provided via MFA. On 24 January 2023, the Commission adopted a proposal to increase 
the ongoing MFA support by EUR 145 million, including EUR 100 million in loans on 
concessional terms, and EUR 45 million in grants. 

Besides the financial assistance provided for the COVID-19 pandemic recovery and the 
Russian war of aggression against Ukraine, in 2022 a third regular MFA for Jordan was 

7 

 
also  put  in  place.  Following  the  fulfilment  of  all  but  one  of  the  14  outstanding  policy 
reforms,  with  the  condition  on  amendments  to  the  Illicit  Enrichment  Law  waived  in 
agreement with the Member State committee on MFA, the third and final instalment was 
released on 31 March 2023.   

The implementation status of MFA operations in 2022 (by region): 

3.1  Eastern Partnership 

  Moldova: new MFA operation 

In  November  2021,  following  the  outbreak  of  an  energy  crisis  reflecting  the  country’s 
still  strong  energy  dependency  on  Russia,  despite  a  post-pandemic  economic  recovery, 
Moldova  officially  requested  a  new  MFA  operation.  After  careful  assessment  of  the 
financing  needs,  the  Commission  prepared  a  proposal  for  support  of  up  to  EUR  150 
million, including EUR 120 million in loans and EUR 30 million in grants. The decision 
to provide additional MFA to Moldova was adopted by the European Parliament and the 
Council on 6 April 2022. Following ratification by the Moldovan Parliament, the MFA 
entered  into  force  on  18  July  2022.  After  fulfilling  the  policy  conditions  agreed  in  the 
Memorandum  of  Understanding  (MoU),  the  first  instalment  was  released  in  July  2022 
and the second instalment in March 2023, both of EUR 50 million in loans and grants. 
Under the current operation, Moldova still has EUR 50 million available to be disbursed 
in one instalment. Moreover, on 24 January 2023, the Commission adopted a proposal to 
increase the ongoing MFA support by EUR 145 million. The additional MFA is part of a 
larger  support  package  by  the  Commission  to  Moldova  in  light  of  the  country’s 
worsening external position due to the severe energy crisis in autumn/winter 2022/2023. 
Following adoption by the Council and the Parliament, it is expected that the additional 
MFA  will  be  disbursed  in  two  instalments  in  the  second  half  of  2023,  when  the 
corresponding policy actions have been fulfilled.  

the  IMF  programme  for  Moldova  of 

The regular MFA operation as well as the proposed increase remains subject to a positive 
track  record  of 
the  Extended  Credit 
Facility/Extended  Fund  Facility,  adopted  in  December  2021  and  augmented  in  May 
2022. After the increase, the Fund’s programme amounts to USD 815 million. In January 
2023, the  IMF  successfully  concluded its  second review,  assessing  the overall progress 
on the programme as positive.  

 

Ukraine: emergency MFA  

The  European  Union’s  financial  support  to  Ukraine  in  response  to  Russia’s  war  of 
agression  increased  progressively,  in  step  with  the  difficult  situation  developing  on  the 
ground  and  based  on  an  assessment  of  Ukraine’s  funding  needs.  This  step-by-step 
approach  resulted  in  the  provision  of  three  MFA  operations  to  Ukraine  in  2022,  where 
the  high  uncertainty  and  extraordinary  circumstances  called  for  novel  and  exceptional 
elements  of  increased  flexibility,  but  also  for  higher  provisioning,  as  further  detailed 
below and in the attached staff working document. An emergency MFA operation of up 
to  EUR  1.2  billion  was  followed  by  an  exceptional  MFA  package  consisting  of  two 
operations for up to EUR 1 and 5 billion, respectively. 

In the context of the escalating geopolitical tensions preceding Russia’s war of agression 
against Ukraine, and in response to an official request by Ukraine of 16 November 2021 

8 

 
 
for a longer-term MFA operation of EUR 2.5 billion, on 1 February 2022 the European 
Commission adopted a proposal on providing a new emergency MFA to Ukraine for up 
to  EUR  1.2  billion  in  loans,  to  be  disbursed  in  two  equal  instalments.  The  European 
Parliament and the Council promptly adopted the Decision on 28 February 2022, thereby 
authorising  the  sixth  MFA  operation  in  Ukraine  since  2014.  The  Commission  and 
Ukraine signed the related MoU on 3 March, which enabled the very swift disbursement 
of  the  first  instalment  of  EUR  600  million  in  two  tranches  on  11  and  18  March  2022. 
Moreover, the war circumstances constitute an event of force majeure that impeded the 
effective  completion  of  the  structural  policy  measures  -  a  precondition  of  the 
disbursement of the second instalment of the MFA, even though the authorities had taken 
steps to address all of them. As an exceptional response to the acute financing needs of 
Ukraine,  and  since  the  conditionality  agreed  in  the  MoU  could  not  be  achieved  at  that 
stage  for  reasons  of  force  majeure,  the  Commission  decided,  having  consulted  the 
Member  States  Committee  for  MFA,  to  proceed  with  the  disbursement  of  the  second 
instalment of EUR 600 million in May, as a matter of urgency. 

 

Ukraine: exceptional MFA  

The financing situation  became increasingly  acute over the summer  2022  with  Ukraine 
increasingly  having  to  print  money  and  draw  down  reserves.  As  a  part  of  the  EU’s 
extraordinary support to Ukraine, the Commission proposed on 1 July 2022 a new EUR 1 
billion MFA operation for Ukraine in the form of a highly concessional and longer-term 
loan (compared to usual conditions - see below). This proposal was the first part of the 
exceptional  MFA  support  of  up  to  EUR  9  billion  announced  in  the  Commission’s 
Communication on Ukraine Relief and Reconstruction of 18 May 2022 and endorsed by 
the  European  Council  of  23-24 June  2022.  The  exceptional  MFA  aimed  to  provide 
immediate  financial  assistance  in  a  situation  of  acute  funding  needs  and  to  ensure  the 
continued functioning of the most critical functions of the Ukrainian state. The European 
Parliament  and  the  Council  adopted  the  Decision  on  12 July  2022,  using  all  available 
procedural flexibilities to adopt it at record speed. The Commission and Ukraine signed 
the related MoU on 19 July, which enabled a disbursement of the whole amount of this 
MFA in two tranches in early August 2022. 

On 7 September 2022, the Commission proposed a new MFA operation of EUR 5 billion 
in  loans  as  a  second  part  of  the  exceptional  MFA  package.  The  MFA  Decision  was 
adopted very swiftly by the European Parliament and the Council on 20 September 2022, 
again  making use of all available procedural  flexibilities to  speed up the process. After 
the  entry  into  force  of  the  MoU  on  4  October,  a  first  instalment  of  EUR  2  billion  was 
disbursed  to  Ukraine  on  18 October.  The  second  disbursement  of  EUR  2.5  billion 
followed  on  22 November  2022.  The  third  and  last  payment  of  EUR  500  million  was 
released  on  14 December  2022.  The  exceptional  MFA  operations,  which  brought  the 
EU’s  immediate  financial  support  to  Ukraine  since  the  beginning  of  the  full-scale 
Russian  invasion  to  a  total  of  EUR  7.2  billion,  were  vital  to  maintain  macroeconomic 
stability in the country. 

Given  the  extraordinary  circumstances  in  Ukraine  due  to  Russia’s  war  of  aggression 
against the country, these exceptional MFA operations introduced some novelties, which 

9 

 
should not be considered a precedent for future MFA operations (8). An overall average 
maturity of up to 25  years, compared to the traditional 15 years,  and the  possibility for 
the EU budget to cover interest rate costs and administrative fee payments strengthened 
the concessional nature of the assistance. To enhance flexibility in the extraordinary war 
situation, and unlike regular MFA operations, the exceptional MFA had no formal link to 
a disbursing IMF programme. Policy conditionality, which has proven to be a key value 
added of macro-financial assistance, was limited to relevant conditions that were deemed 
feasible and which could be expected to be implemented swiftly with a reasonably high 
degree of certainty. Finally, a system of reporting requirements was introduced aimed at 
ensuring  that  funds  received  were  spent  in  an  efficient,  transparent,  and  accountable 
manner.  

The  Ukrainian  authorities  committed  to  provide  monthly  reports  on  revenues  and 
expenditures of the state budget for the major expenditure headings and including details 
on  the  administrative  and  financial  management  measures  in  place  and  the  internal 
controls.  In  addition,  the  backing  of  these  operations  has  been  increased  through  a 
provisioning rate of 70% instead of the usual 9% as stipulated by the NDICI Regulation. 
The standard 9%  remains in  the form  of pad-in  provisioning and 61% in the form  of a 
second-loss guarantee by Member States. This was covered by the EU budget for the first 
operation, in line the regular operational procedures, whereas for the second part, it was 
backed by guarantees by Member States (see Box 1). 

These  novel  and  exceptional  elements,  in  terms  of  e.g.  increased  concessionality, 
flexibility and enhanced reporting also inspired the design of the MFA+ instrument that 
provides financial assistance to Ukraine for 2023. 

 

Ukraine: MFA+ 

Within a month after the request of the European Council of 20-21 October to establish a 
more  structured  approach  to  providing  assistance  to  Ukraine  for  2023,  the  European 
Commission  adopted  a  proposal  to  provide  EUR  18  billion  of  support  inthe  form  of 
highly  concessional  loans  to  Ukraine  for  2023  through  a  new MFA+ instrument.  This 
new instrument ensures a more predictable, continuous, orderly and timely financing to 
make  a  sizeable  contribution  to  Ukraine’s  immediate  funding  needs,  rehabilitation  of 
critical  infrastructure  and  initial  support  for  post-war  reconstruction,  with  a  view  to 
supporting the country on its path towards European integration.  

The  MFA+  instrument,  in  addition  to  integrating  the  novel  elements  introduced  by  the 
exceptional  MFA  package,  e.g.  strenghtened  concessionality  through  longer  loan 
maturities  and  interest  rate  subsidy,  continued  delinking  from  a  disbursing  IMF 
programme,  increased  flexibility  with  the  structural  policy  conditionality  and  enhanced 
reporting  requirements,  allows  for  the  channeling  of  third-party  bilateral  contributions 
towards  the  reconstruction  of  critical  infrastructure  in  Ukraine  (9).  Following  another 
swift process using all procedural flexibilities, the European Parliament and the Council 
adopted  the  Regulation  setting  up  the  MFA+  on  14 December  2022.  The  20  targeted 
policy  conditions  underpinning  this  operation  have  again  been  carefully  designed  to 

8 From a budgetary perspective, the major novelty  is the introduction of an overall 70% coverage rate of 
the exceptional MFA loans to Ukraine, whereby the traditional 9% provisioning rate under the EU budget 
is topped up by bilateral national guarantees for the remaining 61% of the coverage. 
9 From a budgetary perspective, the major novelty of the MFA+ instrument is the coverage of the MFA+ 
loan exposures by the headroom of the EUR budget, thereby having no immediate implications for 
remaining availability of budget allocations under the current MFF period. 

10 

 
 
                                                           
ensure their relevance and feasibility in the current situation. They cover the four areas of 
macro-financial  stability  -  structural  reforms  and  good  governance,  rule  of  law,  and 
energy.  Building on the experience with the exceptional MFA package and recognising 
the impact of the continuing extraordinary  situation, due to Russia’s war of aggression, 
on  the  authorities’  capacity  to  implement  reforms,  satisfactory  progress  on  policy 
implementation is required to enable the disbursement of instalments, except for the final 
disbursement which is conditional on full implementation. The possibility for a midterm 
review of the Memorandum of Understanding  (MoU) provides for additional flexibility 
to  test  the  feasability  of  these  conditions  given  Russia’s  ongoing  war  of  aggression 
against Ukraine. 

The Commission and Ukraine signed the MoU and the Loan Facility Agreement (LFA) 
on  16 January  2023,  both  of  which  entered  into  force  on  the  same  day.  The  first 
instalment of EUR 3 billion in loans was disbursed on 17 January 2023, with the second 
payment of EUR 1.5 billion following 2 months later on 21 March. Pending compliance 
with  the  political  precondition,  the  strengthened  reporting  requirements  on  the  use  of 
funds  and  further  satisfactory  progress  in  implementing  the  agreed  structural  policy 
conditionality, the MFA+ instrument is meant to provide Ukraine with assistance to the 
tune of EUR 1.5 billion per month until the end of 2023 (and which have enabled such 
disbursement on 25 April).  

3.2  Southern Neighbourhood 

 

Jordan: MFA-III  

After the third MFA to Jordan of EUR 500 million in loans entered into force in January 
2020,  the  Jordanian  authorities  requested  additional  assistance  in  April  2020  in  the 
context of the COVID-19 pandemic, and the EU agreed on a ‘top-up’ MFA of EUR 200 
million in loans. The MFA’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  100  million,  plus  EUR  150  million  from  the  COVID-19-
related  top-up)  was  disbursed  on  25 November  2020.  The  second  and  third  instalments 
are subject to the specific policy conditionality agreed between Jordan and the EU in the 
MoU.  The  second  instalment  (EUR  200  million  and  a  top-up  of  EUR  50  million)  was 
disbursed  on  20  July  2021,  sucessfully  concluding  the  COVID-19-related  part  of  the 
assistance.  The  third  instalment  of  EUR  200  million  was  released  on  31 March  2023, 
following a positive assessment of the related policy conditionality.  

These MFA operations are provided in conjunction with the resources from international 
financial  institutions  and  bilateral  donors,  including  the  IMF.  On  25 March  2020,  the 
IMF  approved  a  four-year  Extended  Fund  Facility  programme  with  Jordan  of  initially 
roughly USD 1.3 billion (270% of its quota), which was augmented twice in 2021/2022 
to about USD 1.49 billion (334% of its quota) to step up support to help the country cope 
with  the  impact  of  the  pandemic  on  the  population,  while  hosting  1.3  million  Syrian 
refugees.  The  IMF  approved  the  fifth  review  of  the  EFF  in  December  2022,  making 
about  USD  343  million  immediately  available.  This  brings  the  total  amount  of  IMF 
disbursements to Jordan since the start of 2020 to about USD 1.7 billion, which includes 
around EUR 366 million in emergency assistance under the Rapid Financing Instrument 
in May 2020 to help the country deal with the impact of the pandemic.  While Jordan’s 

11 

 
public debt remained high at 113.2% of GDP in 2022, it was assessed as sustainable by 
the IMF in December 2022. 

 

Tunisia: COVID-19 MFA 

As  part  of  the  COVID-19  MFA  package  adopted  in  May  2020,  the  EU  agreed  on  a 
EUR 600 million MFA in loans for Tunisia. Reflecting lengthy procedures in the partner 
country  it  became  the  penultimate  COVID-19-related  operation  to  enter  into  force:  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 therefore ran until May 
2022. The MFA’s policy conditionality focused primarily on four thematic areas, namely 
public finance management and civil  sector reform,  reforms  in  state-owned enterprises, 
social protection and investment climate.  

The MFA was provided in two instalments of EUR 300 million each. The first instalment 
was subject to the general political preconditions for MFA and was disbursed on 1 June 
2021. The policy reforms required for the disbursement of the second tranche were either 
fulfilled or broadly fulfilled during 2022. Despite concerns on the political preconditions 
following  the  deterioration  in  the  political  situation  since  mid-2021,  and after  a  careful 
assessment  of  the  situation  and  a  letter  from  the  authorities  providing  assurances  and 
setting out commitments on a political calendar, the second instalment was disbursed on 
25 May 2022.   

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

3.3  Western Balkans  

 

Bosnia and Herzegovina MFA-COVID-19 

Following an official request for MFA from Bosnia and Herzegovina on 14 April 2020 to 
address the COVID-19 pandemic, EUR 250 million in loans was included for Bosnia and 
Herzegovina  in  the  COVID-19  MFA  package.  The  MoU  and  the  LFA  were  signed  on 
15 January 2021  and  entered  into  force  on  9 June 2021,  making  this  the  last  of  the 
COVID-19-related  operations  to  enter  into  force.  This  substantial  delay  was  caused  by 
the lengthy decision-making processes of the country. The MFA’s policy conditions for 
the second instalment aimed to address some of the weaknesses in economic governance 
and  institution  building,  as  well  as  financial  sector  stability  and  transparency,  and  to 
support the fight against corruption and a better functioning of the labour market. 

The  MFA  was  to  be  provided  in  two  instalments  of  EUR  125  million  each.  The  first 
instalment  was  disbursed  on  7 October  2021  unconditionally,  while  the  second  tranche 
was  not  disbursed  due  to  insufficient  implementation  of  the  agreed  policy  conditions 
within  the  availability  period  of  the  MFA,  with  seven  out  of  nine  reforms  not  having 
been completed.  

The  assistance  complemented  resources  made  available  by  other  donors,  including  the 
IMF, under its EUR 330 million  Rapid Financing Facility (RFI) programme  for Bosnia 
and Herzegovina, approved on 20 April 2020.  

12 

 
4 

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

4.1  Operational assessments 

In  line  with  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  2022,  a  new  operational  assessment  of  Ukraine  was  initiated  in  the  context  of  the 
MFA+  operation.  The  external  consultants  concluded  that,  despite  the  Russia’s  war  of 
aggression, the financial circuits  and procedures  of the  country  are deemed  sufficiently 
appropriate  for  the  purposes  of  MFA.  They  confirmed  that  Ukraine’s  public  financial 
management  systems  and  other  financial  circuits  improved  considerably  in  the  years 
following  the  2018  operational  assessment  and  that  the  Ukrainian  government  remains 
committed  to  improving  systems  and  processes,  with  ample  evidence  to  suggest  that 
several  crucial  reforms  had  taken  place  or  were  ongoing  before  being  abruptly 
interrupted by the Russian full-scale invasion.   

4.2  Evaluations  

In  line  with  the  EU  Financial  Regulation  and  the  corresponding  MFA  decisions,  the 
Commission conducts evaluations (10) after the completion of MFA operations 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  September  2022,  following  the  completion  of  the  external  study  in  2021,  the 
Commission  published  a  staff  working  document  setting  out  the  results  of  the  joint 
evaluation of the operations with Tunisia and Jordan.  

In addition and going beyond the legal obligations, the Commission completed a meta-
evaluation of all MFA operations over 2010-2020 already presented in last year’s report, 
while  taking  into  account  the  recommendations  of  the  Regulatory  Scrutiny  Board.  The 
meta-evaluation  assessed  the  principles  and  characteristics  governing  the  MFA 
instrument  and  aimed  to  provide  input  on  how  to  improve  its  relevance,  effectiveness, 
efficiency,  value  added  and  its  ability  to  respond  to  the  EU’s  external  action  priorities. 
The accompanying staff working document was published in January 2023. 

  Tunisia  and  Jordan:  the  evaluation  covered  the  MFA  operation  to  Tunisia  in 
2017-2019 and to Jordan in 2017-2019, which was in each case the second such 
support  package  to  the  country.  It  found  that  the  size,  form  and  timing  of  the 
operations  were  relevant  and  appropriate  to  the  countries’  financing  needs, 

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

13 

 
                                                           
 
providing EU added value. In both countries, the MFA had a positive impact on 
debt  sustainability  and  played  a  positive  role  in  promoting  macroeconomic 
stabilisation.  The  conditionality  was  relevant  and  focused  on  key  reform  areas. 
The  operations  supported  positive  change  in  some  reform  areas,  despite  mixed 
progress  on  some  other  specific  reforms.  This  was  the  first  time  that  two 
operations,  given  regional  similarities,  overlapping  implementation  timeframes 
and comparable conditionality, were grouped into a single evaluation in order to 
draw  conclusions  going  beyond  the  specific  operation.  From  a  regional 
perspective,  the  positive  impact  and  spillovers  on  the  Middle  East  and  North 
Africa (MENA) region of the two MFAs was less measurable given the relatively 
small size of the supported economies and low intraregional integration, possible 
positive  impacts  were  mostly  related  to  the  confidence  effect.  Both  operations 
were found to be consistent with the overall EU policy framework, aligned with 
the authorities’ reform agenda and other donors’ programmes. Given the overall 
positive experience with grouping the two operations into a single evaluation, it is 
planned to proceed in the same way for the next ones, notably on the 2017-2020 
operations  in  the  EaP  and  for  the  COVID-19  package,  respectively,  where  this 
approach  appears  particularly  relevant  and  promising  given  the  common  shock 
underlying the need for support.  

  The meta-evaluation of MFA operations 2010-2020: the evaluation covered 15 
MFA operations with the EaP countries, the Southern Neighbourhood countries, 
pre-accession  and  other  countries;  complemented  by  more  recent  experiences 
with  the  COVID-19  package  and  the  2022  MFA  operations  with  Ukraine.  It 
found  that  these  operations  were  efficient,  relevant,  coherent,  and  that  they 
generated  EU  added  value.  Moreover,  the  MFA  instrument  was  effective  in 
helping  restore  external  sustainability  and  promoting  structural  reforms.  The 
effectiveness of MFA was notably supported by  (i) the focus on countries in the 
EU’s direct vicinity and the strong ties with those countries, (ii) by the preference 
for loans and the standard availabilty period of 2.5 years which is long enough to 
incentivise  reforms  and  their  implementation,  and  (iii)  the  fact  that  policy 
conditions  (which  were  found  to  be  relevant  and  rightly  sequenced)  ensured  a 
comprehensive reform  effort. The  evaluation  also  confirmed that the objectives, 
design and implementation of MFA operations  were largely complementary and 
consistent with other EU initiatives and IMF operations. However, the evaluation 
also pointed to some limitations. The procedures to adopt MFA operations  were 
assessed  as  lengthy  for  a  crisis  instrument,  somewhat  undermining  their 
effectiveness.  This  was  the  case  especially  for  standard  decision-making 
procedures, and the recent experiences with the COVID-19 package and the 2022 
MFA  support  to  Ukraine  showed  that  using  all  available  procedural  flexibilities 
helped significantly. The MoU’s lack of flexibility also appeared to have reduced 
the  effectiveness  of  MFA  in  times  of  profound  changes.  The  evaluation  also 
indicated  the  need  to  strengthen  the  visibility  of  the  MFA  in  beneficiary 
countries.  From a methodological  perspective, the MFA evaluations  were  found 
to  be  carried out  to a high standard, especially after the 2015  Better Regulation 
Guidelines came into effect. 

Additional information on the two evaluations is provided in the staff working document 
accompanying this report.  

14 

 
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  MFA  (11) 
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  the 
above-mentioned  meta-evaluation  of  MFA  operations  (2010-2020)  that  delays  in 
adopting MFA decisions by the European Parliament and the Council within the ordinary 
legislative  procedure  can  be  a  major  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 (12). 

However, the Commission notes that the experiences with the COVID-19 MFA package 
and the 2022 MFA operations to Ukraine (emergency MFA, exceptional MFA, MFA+) 
showed  that  the  current  set-up  of  MFA  can  allow  for  a  very  swift  adoption,  if  all 
institutions agree to make full use of the available procedural flexibilities. In these cases, 
the  Commission  worked  with  the  Parliament  and  the  Council  to  agree  on  the  use  of 
existing  urgency  procedures  which  allowed  for  the  corresponding  assistance  to  be 
adopted within 1 month of the Commission’s respective proposals by both co-legislators. 
The  European  Parliament  invoked  a  specific  clause  (Rule  163)  in  their  Rules  of 
Procedure,  which  permitted  it  to  immediately  adopt  the  Decision  in  Plenary,  without 
having  to  go  through  the  International  Trade (INTA)  Committee,  as  is  the  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 swift adoption in urgent situations. 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 Parliament, 
which  would  not  have  been  the  case  if  the  Commission  had  proposed  measures  on  the 
basis  of  Article  213  TFEU  (applicable  for  cases  where  urgent  financial  assistance  is 
required and by only the Council adopting the MFA operation).  

5.2  MFA in the 2021-2027 multiannual financial framework 

As  the  EU’s  Neighbourhood  and  Enlargement  remain  exposed  to  high  geopolitical 
uncertainty  and  continues  to  experience  economic  instability,  further  exacerbated  by 
Russia’s  war  of  aggression  against  Ukraine,  the  need  for  the  EU  to  consider  providing 
MFA is likely to remain high in the years to come. It is therefore important to make sure 
that the budgetary backing conditions for this are in place.  

11 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 

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

15 

 
 
                                                           
MFA  loans  are  guaranteed  by  the  External  Action  Guarantee  that  was  created  by  the 
NDICI  Regulation,  at  a  provisioning  rate  of  9%  as  was  the  case  under  previous  MFFs 
(13). In view of the extraordinary support needs since the start of the MFF and notably the 
EU’s sizeable support to Ukraine via MFA in 2022, much of the available provisioning 
has  already  been  used.  Box  1  provides  some  detail  on  the  budgetary  treatment  of  the 
support to Ukraine in 2022.  

1.  Box – budgetary treatment of support to Ukraine in 2022 

The  EU’s  financial  support  to  Ukraine  in  response  to  the  Russian  war  of  agression 
evolved progressively,  reflecting its  funding needs. This  step-by-step approach resulted 
in the provision of three MFA operations in 2022, with the introduction of several novel 
exceptional budgetary arrangements as compared to regular MFA operations.  

First,  the  emergency  MFA  to  Ukraine  of  up  to  EUR  1.2  billion  in  loans  adopted  on 
28 February 2022 followed the regular pattern of MFA operations, and was provisioned 
at 9% of the nominal value of the loan, in accordance with the NDICI Regulation. 

Second,  in  view  of  the  extraordinary  situation  in  Ukraine,  namely  to  finance  the 
immediate  funding  needs  following  the  unprovoked  and  unjustified  aggression  by 
Russia,  it  was  decided  that  the  loans  to  Ukraine  under  the  exceptional  MFA  (EUR  6 
billion  in  two  operations  of  respectively  1  and  5  billion),  given  their  higher  risk  in  the 
war context, would be covered for 70% of their value (14). Given the limited budgetary 
availability under the MFA, this translates into paid-in provisions under the EU’s budget 
at  the  traditional  9%  provisioning  rate  and  additional  callable  bilateral  national 
guarantees by the Member States for the remaining 61% of the amounts.  

Finally, given the persistence and escalation of the war, the co-legislators adopted further 
and more structured support for the year 2023 of EUR 18 billion in loans in the form of a 
new MFA +. To limit the crowding out effect of the sizeable support to Ukraine on future 
MFA operations in other partners countries, it was decided that the risks associated with 
this lending would be covered in a different manner. More precisely, the  corresponding 
financial liability is guaranteed by the available margin under the ‘own resources’ ceiling 
(i.e.  the  ‘headroom’).  This  relates  to  the  flexibility  afforded  by  the  fact  that  ressources 
can be mobilised over and above the MFF ceilings and up to the limits of the ceilings of 
the EU’s own resources. This arrangement allows the lending to take place without the 
provisioning that the NDICI Regulation usually stipulates.  

Recent developments have therefore left a significant hole in the MFA budget for loans 
because of the size and nature of the support to Ukraine. More than 60% of the budget 
allocated  to  cover  for  the  provisioning  of  MFA  loans  under  the  current  MFF  has  been 
used so far, only 2 years after the entry into force of the current MFF. With MFA being a 
crisis instrument, needs are not programmable and are difficult to predict, but are likely 
to  remain  sizeable  in  the  current  context  of  high  geopolitical  uncertainty  and  the 
economic fallout from the Russian war of aggression against Ukraine adding to existing 

13 The NDICI - ‘Global Europe’ instrument entered into force in June 2021, after its formal adoption by the 
Council and the Parliament. While the Regulation therefore plays an important role in the budgetary set-up 
of  MFA,  the  instrument  as  such  remains  separate  from  NDICI-Global  Europe,  and  specific  MFA 
operations continue to be activated, as needed, by separate ad-hoc decisions on the basis of the applicable 
Treaty legal basis.  
14  The  Regulation  also  includes  a  review  clause  of  the  provisioning  rate,  every  6  months,  given  the 
exceptional uncertainty given the current war. 

16 

 
                                                           
macro-fiscal imbalances in many partner countries. It would appear important to ensure 
that  sufficient  resources  are  available  so  that  eligible  requests  can  be  considered  and 
possibly responded to in a favourable manner in a way that is consistent across countries 
and over time. 

The  External  Action  Guarantee  is  being  managed  through  the  Common  Provisioning 
Fund. In the context of the EU’s exposure to Ukraine and the region, the Commission has 
embarked on an assessment of the risks involved.      

6 

LOOKING AHEAD - MFA OPERATIONS AND BUDGETARY SITUATION IN 2023   

The  Moldovan  economy  has  been  heavily  impacted  by  Russia’s  full-scale  invasion  of 
Ukraine, which contributed to higher financing needs, further amplified by the ongoing 
energy crisis. In light of this, the authorities requested further international support. Thus, 
on  10 November 2022,  the  Commission  President  announced  an  additional  financial 
support package  for Moldova of EUR 250 million, to  be partly disbursed via the MFA 
instrument.  On  24 January 2023,  the  Commission  adopted  a  proposal  to  increase  the 
ongoing MFA operation by up to EUR 145 million, including up to EUR 100 million in 
loans on concessional  terms and  up to  EUR 45  million  in  grants.  The increase is  to  be 
disbursed in two additional instalments, tentatively foreseen for Q3/Q4-2023, subject to 
new  policy  conditions  being  added  to  the  existing  Memorandum  of  Understanding 
(MoU). The adoption of the proposal by the European Parliament and the Council took 
place in May 2023.  

in 

two 

instalments, 

On  6  February  2023,  the  Commission  adopted  a  proposal  to  provide  MFA  to  North 
Macedonia of up to EUR 100 million following a deterioration in the country’s economic 
situation  and  outlook  since  its  first  request  in  April  2022.  The  MFA  is  expected  to  be 
tentatively  foreseen  for  Q3-2023  and  Q1-2024, 
disbursed 
respectively. The release of each instalment will be conditional on progress being made 
with  the  implementation  of  a  number  of  policy  measures  to  be  agreed  between  the 
Commission and the authorities and listed in a MoU, as well as satisfactory track record 
in the implementation of the IMF programme with the IMF Executive Board adopting a 
24-month precautionary and liquidity line (PLL) for North Macedonia of up to EUR 530 
million on 22 November 2022. The MFA proposal to North Macedonia was adopted by 
the European Parliament and the Council in June 2023.  

Tunisia  requested  additional  EU  macro-financial  assistance  of  EUR  1.2  billion  in 
November  2022  to  support  its  financing  needs  in  the  context  of  a  slow  post-pandemic 
recovery  and  the  economic  fallout  of  Russia’s  war  of  aggression  in  Ukraine.  This 
followed  the  staff-level  agreement  reached  with  the  IMF  for  a  new  Extended  Fund 
Facility  (4  years,  USD  1.9  billion)  in  October  2022.  However,  the  IMF  has  not  yet 
adopted  the  programme  due  to  the  need  for  additional  financing  assurances  and  for 
completing  prior  actions.  Due  to  the  escalating  crisis,  Tunisia’s  external  residual 
financing  gap  is  growing  and  the  implementation  of  reforms  to  address  the  country’s 
vulnerabilities  has  become  even  more  urgent.  Based  on  a  careful  assessment  of  MFA 
preconditions  and  Tunisia’s  external  financing  needs,  the  Commission  is  preparing  a 
proposal for a new MFA to be adopted in 2023 once the IMF programme is in place.  

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

17 

 
Table  1  provides  an  overview  of  commitments  and  payments  of  MFA  grants  and  the 
disbursement of MFA loans for 2020, 2021, 2022 and (provisionally) 2023.  

18 

 
Table 1: Commitments and payments for MFA grants and disbursements of MFA 
loans 2020-2023 (EUR) (15) 

Commitment appropriations for grants in the 
budget 

20 000 000 

227 200 

30 114 460 

56 710 579 

2020 

2021 

2022 

2023 

     Operational assessments, Ex post evaluations 
     Other possible MFA operations 
Commitments, total 

293 900 
- 
293 900 

227 200 
- 
227 200 

114 460 
30 000 000 
30 114 460 

350 000 
45 000 000 
45 350 000 

Uncommitted budget allocations 

19 706 100 

TBD 

Payment appropriations for grants in the budget 

27 000 000 

362 400 

20 868 187 

55 350 000 

     Operational assessments, Ex post evaluations 
     MFA Georgia III (completed) 
     MFA Moldova (completed) 
     MFA Moldova 
     Other possible MFA operations 
Payments, total 

284 600 
5 000 000 
10 000 000 
- 
- 
15 284 600 

362 400 
- 
- 
- 
- 
362 400 

- 
- 
- 
15 000 000 
- 
- 

350 000 
- 
- 
55 000 000 
- 
55 350 000 

Unused allocations for grants payments 

11 715 400 

5 868 187 

Disbursements of MFA loans 
     MFA Georgia III (completed) 
     MFA Moldova (completed) 
     MFA Ukraine IV (completed) 
     MFA Jordan II (completed) 
     MFA Jordan III (completed) 
     MFA Tunisia II (completed)    
     MFA Moldova 
     Emergency MFA Ukraine 
     Exceptional MFA Ukraine 
     MFA Moldova top-up 
     MFA+ Ukraine 
Disbursements of MFA loans, total 

20 000 000 
20 000 000 
500 000 000 
- 
100 000 000 
- 
- 
- 
- 
- 
- 
640 000 000 

- 
- 
- 
- 
200 000 000 
- 
- 
- 
- 
- 
- 
200 000 000 

-  
- 
- 
- 
- 
- 
35 000 000 
1 200 000 000 
6 000 000 000 
- 
- 
7 235 000 000 

- 
- 
- 
- 
200 000 000 
- 
35 000 000 
- 
- 
140 000 000 
18 000 000 000 
18 375 000 000 

COVID-19 MFA operations: 
     MFA Georgia (partially disb.) 
     MFA Moldova (completed) 
     MFA Ukraine (completed) 
     MFA Jordan (completed) 
     MFA Tunisia (completed) 
     MFA Albania (completed) 
     MFA Bosnia and Herzegovina (partially disb.) 
     MFA Kosovo (completed) 
     MFA Montenegro (completed) 
     MFA North Macedonia (completed) 
Disbursements of COVID-19 MFA loans, total 

75 000 000 
50 000 000 
600 000 000 
150 000 000 
- 
- 
- 
50 000 000 
30 000 000 
80 000 000 
1 035 000 000 

- 
50 000 000 
600 000 000 
50 000 000 
300 000 000 
180 000 000 
125 000 000 
50 000 000 
30 000 000 
80 000 000 
1 465 000 000 

- 
- 
- 
- 
300 000 000 
- 
- 
- 
- 
- 
300 000 000 

- 
- 
- 
- 
- 
- 
- 
- 
- 
- 
- 

Disbursements of all MFA loans, total 

1 675 000 000 

1 665 000 000 

7 535 000 000 

18 375 000 000 

15 The table does not take into account any proposal for new MFA operations after April 2023. 

19