EU's 2023 macro-financial assistance to Ukraine tied to fulfillment of 20-point memorandum
MOSCOW. Jan 17 (Interfax) - Ukraine's progress in fulfilling the 20 points of the memorandum of understanding, signed by Ukraine and the European Union on Monday, will be key to the disbursement by the EU of the second and subsequent tranches of its $18-billion macro-financial assistance package.
An informed source in the Ukrainian government, has confirmed this information, which initially appeared in the European Pravda online newspaper, to other Ukrainian media outlets.
European Pravda said on Monday that the memorandum's 20 points are split into four groups, such as The Rule of Law, Energy, Structural Reforms and Good Governance, and Macro-Financial Stability.
Some of these points echo the memorandum signed with the International Monetary Fund (IMF), a document, which imposed even tougher deadlines on the government and the National Bank of Ukraine (NBU), the source said. For instance, the memorandum signed with the IMF sets the deadline until the end of January if the supervisory board of Naftogaz is appointed, while the document signed with the EU indicates the first quarter of 2023.
The largest number of points - seven - are contained in the Rule of Law section, the source said. In particular, they include completing the selection of a new head of the National Anti-Corruption Bureau of Ukraine (NABU) in the first quarter of 2023, appointing him to this position in the second quarter, resuming the work of the Supreme Council of Justice and the Higher Qualification Commission of Judges in the third quarter of the year based on recommendations from the Ethics Council, as well as further steps to boost the potential of the Specialized Anti-Corruption Prosecutor's Office before the end of the year.
Other measures include updating the procedure for selecting judges and secondary legislation in combating money laundering, including in terms of beneficial ownership, developing and adopting a comprehensive strategic plan to reform the entire law enforcement sector, and criminalizing large-scale smuggling of all goods, the source said.
The Structural Reforms and Good Governance section contains five points the aim of which is to promote customs administration reforms with a gradual update over the year of IT systems, personnel management and anti-corruption measures, updating the procedure for selecting independent members of the supervisory boards and the boards of major state-owned enterprises and bringing legislation in line with the requirements of the administrative procedure law, which was adopted in February 2022 and is due to enter into force in December of this year, he said.
This section also includes an action plan for deregulation and business climate improvement expected in February, updating the e-construction website and other similar norms before April, ranging up to digitizing the license issuance process before the end of the year, gradual steps to bring the state procurement system in line with European Union laws and the need to maintain the Medical Procurement of Ukraine state enterprise's central role in procurement for the healthcare system, the source said.
The remaining two sections have four points each, the source said. The Energy section calls for measures to bolster the legal and administrative framework for the use high energy efficiency standards, draft an action plan in the second quarter to rebuild destroyed energy infrastructure also relying on the "green transition" objectives, and to make progress before the end of the year in fulfilling the road map for Ukrainian electricity market's integration with the European market, he said.
Another point sets the goal of improving the Ukrainian gas sector's operations by electing the Naftogaz of Ukraine supervisory board, certifying the operator of gas storage facilities and launching the process of restructuring the Gas Transmission System Operator of Ukraine in the second quarter of 2023 based on a target model, the source said.
The Macro-Financial Stability section, in turn, contains a roadmap which echoes the memorandum signed with the IMF and envisages the step-by-step abolition of temporary emergency tax measures in the first half of the year and the introduction of measures to maintain the stability of the banking system, the source said. Another two points with a deadline in the third quarter deal with updating the bankruptcy procedure, including the possibility of writing off individuals' debts, as it is done in the EU, and strengthening the insurance market accompanied by NBU's checks of insurance companies' ownership structure and their compliance with prudential requirements.
Furthermore, the memorandum requires Ukraine to substantiate its needs for EU financing, submit reports detailing the use of these funds, and monitor the macroeconomic and fiscal situation and structural policies, he said.
As reported, European Commission President Ursula von der Leyen said on Monday that the first 3-billion-euro tranche of the EU's 2023 macro-financial assistance package of 18 billion euros would be disbursed to Ukraine on January 17.
Ukraine's Finance Ministry and government in 2022 estimated the amount of financing to cover budget needs at around $5 billion. However, this sum was received entirely from external sources only in December, prompting the NBU to cover the shortage by purchasing government bonds for 400 million hryvni during the year.
In 2023, the government plans to reduce the budget deficit to $3 billion - $4 billion a month (a total of $38 billion per year), counting on financial assistance from the United States, the IMF and the EU, and to draw $17 billion for emergency reconstruction.
According to the Finance Ministry, the overall amount of macro-financial assistance received from the EU since the start of the crisis stands at 7.96 billion euros, and another $626 million has been provided as grants.