European officials on Oct. 12 announced that Ukraine will receive the second 600 million euro ($692 million) tranche of the European Union’s macro-financial support package.
Ukraine received the first tranche, also worth 600 million euros, in December 2020, to help alleviate the economic pain of the COVID-19 epidemic. Notably, the EU approved both tranches without waiting for the approval of the International Monetary Fund (IMF).
“We welcomed the implementation of the EU Emergency Macro-Financial Assistance Program for Ukraine and took note of the decision to allocate the second tranche of 600 million euros,” reads an official joint statement by Ukraine and the EU after their Oct. 12 summit in Kyiv.
Ukraine has yet to meet the IMF’s conditions for the second tranche of a separate assistance loan. These conditions include substantial judicial reform.
In August, European Commission President Valdis Dombrovskis said that Ukraine satisfied all conditions to receive the next 600 million euro tranche but the European Commission still needed the IMF’s approval.
This approval never arrived. Ukrainian publication Ekonomichna Pravda reported that the EU decided to issue the money in spite of the IMF’s opinion.
This year witnessed a series of high-profile judicial reform scandals, which stalled negotiations with the IMF.
On Sept. 13, Ukraine’s Council of Judges failed to select experts for some of its supervisory panels, sparking international concerns that Ukraine’s reforms were stalling. On April 30, the IMF recalled its senior economist from Ukraine over the decision to summarily dismiss Naftogaz CEO Andriy Kobolyev.
The statement issued by the EU appears to acknowledge the shortcomings.
“We emphasize the importance of continuing the relevant reforms. We reaffirmed the importance of maintaining Ukraine’s macroeconomic stability and adherence to IMF commitments.”
The EU had approved the first tranche of funding for Ukraine without any conditions due to financial pressures caused by COVID-19.
The issuance of the second tranche of the funding was dependent on Ukraine satisfying eight conditions, according to a Memorandum of Understanding signed with the European Commission. This included managing its public finances, fighting corruption, improving businesses, and managing state-owned enterprises.
The European Union is one of the largest international donors to Ukraine. The EU and European financial institutions have pledged over $12 billion to Ukraine as of March 2020, of which it has already mobilised over $6.9 billion, according to official statistics.
Ukraine is also heavily reliant on financial support from the IMF. In June 2020, the IMF issued its first tranche of $2.1 billion out of a total $5 billion loan program to help the Ukrainian economy to recover from the coronavirus pandemic.
This program was later suspended due to Ukraine’s slow progress in making necessary reforms in the banking sector, legislation, and anti-corruption infrastructure.
The IMF has insisted that Ukraine must carry out many more financial and judicial reforms if it wishes to receive the remaining $2.2 billion before the program ends this year.
On Aug. 22, Ukrainian Prime Minister Denys Shmyhal stated that the government had taken steps to improve Ukraine’s anti-corruption infrastructure, the natural gas market and corporate governance of state-owned enterprises.
According to Ukrainian Central Bank director Kyrylo Shevchenko, Ukraine still expects to receive the tranche this year in three installments.
In July, Serhiy Fursa, a Dragon Capital investment banker, stated that another tranche would be “impossible,” due to Ukraine’s wavering commitment to reforms.
