The EU has promised $15 billion of financial help to Ukraine
6 March 2014 |
The European Union has promised $15 billion of financial help to Ukraine as the nation tightens its belt amid a looming cash crunch.
European Commission President Jose Manuel Barroso told reporters in Brussels on March that the money would come via various instruments over several years.
Ukraine will receive $1.4 billion in the form of loans, paid from the EU budget. Another $2 billion will come as EU grants over the next seven years. The European Investment Bank is to contribute $4.2 billion over 2014-2016 and the European Bank for Reconstruction and Development is to add $7 billion through 2020.
Meanwhile, Barroso added that the macro-financial aid and some $840 million in new grants can be disbursed “very fast … within a matter of weeks.”
Earlier on Feb. 5 Finance Minister Oleksandr Shlapak said that Ukraine must pay out $10 billion by end of this year to service all of its debt obligations.
“The $15 billion (of EU money) mentioned was just window dressing and little of this will be disbursed as balance of payments/budget support,” said Timothy Ash, head of research for emerging markets at Standard Bank in London.
“Everything will depend on how this money will be used. It could be used for fixing the balance of payments, the central bank’s reserves, or the budget gap,” said Igor Burakovsky, head of the Institute for Economic Research and Policy Analysis.
Barroso also proposed that EU countries should immediately apply lower trade tariffs on Ukrainian imports, as envisaged in a future free trade agreement that ex-President Viktor Yanukovych had originally shunned on Nov. 21.
If Ukrainian producers who want to access EU markets get easier conditions for adapting to European standards, this would contribute greatly to the macroeconomic assistance package, said DmytroChurin, leading analyst for Eavex Capital investment house. “It would diminish all the fears and nervousness that industrial market actors had at the end of last year,” he explained.
U.S. Secretary of State John Kerry visited Kyiv on March 5 and pledged $1 billion in financial help for Ukraine within the bigger package to be provided by Western countries.
However, the Ukrainian government is not being overly optimistic about both the EU and the U.S. pledges. Still, a default risk is much less likely than it was a month ago, but the “treasury is empty,” said Prime Minister Arseniy Yatseniuk.
State debt reached $73.2 billion in January, and the International Monetary Fund must be paid $1 billion in early May, and another $1 billion must be disbursed to cover eurobonds maturing in June.
Shlapak on March 5 called on holders of Ukrainian debt to discuss a restructuring plan. “Of course, we will make such an offer to our partners,” he said.
Austerity on the part of government has already begun. It cut a number of social programs and other projects to save $5.1 billion. These measures include a ban for state bodies to purchase automobiles, mobile phones and laptops. Moreover, some state-owned automobiles will be sold through the publicly held auctions.