Law of Ukraine

"On Ratification of the Memorandum of Understanding between Ukraine as Borrower and the European Union as Lender, and the Loan Agreement between Ukraine as Borrower, the National Bank of Ukraine as Agent of Borrower, and the European Union as Lender, on Macro-Financial Assistance for Ukraine from the European Union of up to 610 Million Euro"

Date of entry into force:
March 23, 2014

The Memorandum of Understanding between Ukraine as Borrower and the European Union as Lender (hereinafter referred to as "Memorandum") was signed on February 25, 2012 in Brussels and on March 26, 2013 in Kyiv.

The Loan Agreement between Ukraine as Borrower, the National Bank of Ukraine as Agent of Borrower, and the European Union as Lender (hereinafter referred to as "Loan Agreement") was signed on March 26, 2013 in Kyiv and on April 16, 2013 in Luxembourg, pertaining to macro-financial assistance for Ukraine from the European Union of up to 610 million EUR.

The Constitution of Ukraine (Article 85, paragraph 32) states that the Verkhovna Rada of Ukraine provides consent for Ukraine to be bound by international agreements. And, according to Article 9 of the Law of Ukraine "On International Agreements of Ukraine", the Agreement is subject to ratification.

The Law ratifies the Memorandum and the Loan Agreement.

According to the Memorandum, on 12 July 2002, the Council of the European Union adopted a decision to make available to Ukraine macro-financial assistance of up to 110 million EUR in the form of a loan (Decision 2002/639/EC). On 7 July 2010, the European Parliament and the Council of the European Union adopted a decision to make available to Ukraine macro-financial assistance of up to 500 million EUR in the form of a loan (Decision 646/2010/EU). The objective of this assistance is to ease Ukraines external financing constraints, alleviate its balance of payments and budgetary needs and strengthen its foreign exchange reserve position. This assistance from the European Union is complementary to the resources provided to Ukraine by International Financial Institutions and bilateral donors in support of the authorities economic stabilization and reform program.

The disbursement of the assistance will be conditional upon a satisfactory track record in the implementation of the Arrangement to be agreed between Ukraine and the International Monetary Fund (hereafter referred to as "the IMF"), as well as upon a positive assessment by the European Commission (hereafter referred to as "the Commission") on behalf of the European Union, of progress made with respect to economic stabilization and structural reforms.

The macroeconomic and structural adjustment policy conditions attached to the mentioned assistance are based on the economic stabilization and reform program endorsed by Ukraine's authorities and are consistent with agreements reached by Ukraine with the IMF.

The quantitative performance criteria attached to the EU assistance will be those stipulated under the Arrangement to be agreed between Ukraine and the IMF. The quantitative performance criteria are currently: ceiling on the cash deficit of the general government; ceiling on the cash deficit of the general government and "Naftogaz of Ukraine" NJSC; floor on cumulative change in net international reserves; ceiling on cumulative change in net domestic assets; ceiling on publicly guaranteed debt; and the non-accumulation of external debt payments arrears by the general government. Accordingly, before the release of each installment of this assistance, the Commission, in co-operation with the national authorities and IMF staff, will verify that the quantitative performance criteria have been adequately respected or new understandings reached.

According to the Memorandum, the assistance will be disbursed in four installments. The first and second installments (of 100 million EUR and 10 million EUR, respectively) shall be disbursed under the Decision 2002/639/EC, and the third and fourth installment (of 250 million EUR each) under the Decision 646/2010/EU. The first installment of the assistance will be disbursed upon entry into force of this Memorandum and the corresponding Loan Agreement, provided that Ukraine receives disbursements under the Arrangement to be agreed with the IMF. The disbursement of the second installment under each Decision shall not take place earlier than three months after the release of the first installment under the same Decision. The second installment under the Decision 2002/639/EC can be disbursed on the same date as the first installment under the Decision 646/2010/EU, as long as such installments have the same maturity, grace period (if any), interest rate and repayment profile.

Upon receipt of compliance statements by the authorities of Ukraine and before the release of each of the second and subsequent installments, the Commission will evaluate, in co-operation with the authorities of Ukraine and IMF staff, progress made with respect to the fulfillment of the quantitative performance criteria and a selected number of structural reform criteria. In this evaluation, particular attention will be paid to reforms in public finance management and a number of further structural reform areas. The policy measures and frame of reference for this evaluation are made explicit in Annex I. It may be adjusted as appropriate at a later stage.

The effective payment of different installments shall be subject to the signature of the corresponding Loan Agreement by the parties and its entry into force.

The Commission will make available the proceeds of the assistance to Ukraine through the National Bank of Ukraine, which acts as the Borrowers Agent in the context of the EU macro-financial assistance.

The authorities of Ukraine undertake to timely and fully service all financial obligations stemming from loans provided or guaranteed by the European Union. During the implementation of the assistance, the authorities of Ukraine shall supply the Commission with all information that is relevant for the monitoring of its economic and financial situation and that will be needed for the assessment of the quantitative performance criteria and for the review of progress in structural reforms. In particular, the authorities will supply to the Commission on a timely basis the relevant information as set out in Annex II.

According to Article 1 of the Loan Agreement, the Lender grants to the Borrower a loan in EUR, for a total amount of up to 610 million EUR, to be disbursed in four installments (hereinafter referred to as "Installments", all Installments hereinafter collectively referred to as "Loan"), with regard to the provisions and terms determined in Decisions, the Memorandum, and the Loan Agreement.

The first and second installments shall be disbursed under the Decision 2002/639/EC, while the third and fourth installment, under the Decision 646/2010/EU. The disbursement of the second installment under each Decision shall not take place earlier than three months after the release of the first installment under the same Decision. Two installments under different Decisions can be disbursed on the same date, as long as such installments have the same maturity, grace period (if any), interest rate and repayment profile.

The Loan maturity shall not exceed 15 years (Article 15 of the Loan Agreement).

According to Article 7 of the Loan Agreement, the Borrower repays each Installment on the dates and according to the terms stipulated in borrowing Contracts and communicated to the Borrower by the Lender.

Article 10 of the Loan Agreement provides for obligations pertaining to inspections, fraud prevention, and audit.

Annexes to the Loan Agreement establish the forms for:
  • Fund disbursement request;
  • Acceptance notification;
  • Legal opinion.
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