Brussels, 27/03/2014 (Agence Europe) - The European Commission hopes that its first macrofinancial aid payment to Ukraine of €1 billion can be disbursed in June.
On Thursday 27 March, a spokesman for Euro Commissioner Olli Rehn said the criteria for payment of EU aid will be the same as the criteria for IMF aid. An EU macrofinancial aid programme to the tune of €610 million is already in place, and a separate plan for €1 billion is still in negotiation with the Ukrainian authorities to decide, inter alia, on the criteria for the aid, which will have to be approved by the member states (see EUROPE 11042). Rehn's spokesman refused to comment on the 50% hike in gas prices in Ukraine. Fuel prices in the country are heavily subsidised and this is a drain on the public purse, Rehn noted last week when announcing the additional €1 billion of aid, recommending special measures to help vulnerable sections of the population, along possibly with a rise in fuel prices.
The Commission has welcomed the announcement the same day of a technical-level agreement between Ukraine and the IMF on an economic reform programme and aid of between USD 14 billion and USD 18 billion. The technical-level agreement is due to be formalised in April. In a press release, the IMF head of mission, Nikolay Gueorguiev, said: “The financial support from the broader international community that this programme will unlock amounts to USD 27 billion over the next two years. (…) The programme will focus on reforms in the following key areas: monetary and exchange rate policies; the financial sector; fiscal policies; the energy sector; and governance, transparency and the business climate”.
Ukrainian banks will be strengthened by recapitalisation and greater supervision of the central bank in order to reduce the public deficit from 4.5% in 2013 to 2.5% in 2016, mostly through a reduction in spending without hurting the most vulnerable sections of the population. Gas company Naftogaz will undergo a cost-cutting restructuring and its accounts will be subject to independent quarterly audits. (MB)