Macro-financial assistance to enlargement and neighbourhood partners in the context of the COVID 19 pandemic

SUMMARY OF:

Decision (EU) 2020/701 on providing macro-financial assistance to enlargement and neighbourhood partners in the context of the COVID 19 pandemic

WHAT IS THE AIM OF THE DECISION?

The COVID-19 pandemic has very damaging effects on economic and financial stability in the enlargement and neighbourhood regions with their economies moving into recession. Against this background, the European Union is making available macro-financial assistance (MFA)* to support 10 neighbouring partner countries.

KEY POINTS

The EU is making MFA available to 10 neighbouring countries (partners), up to a maximum total amount of €3 billion, to support economic stabilisation and an agreed programme of economic reforms. The assistance is designed to contribute to covering the partners’ urgent balance-of-payments needs, as identified in an agreed programme, and a credit arrangement between the parties and the International Monetary Fund (IMF).
The support is based on an estimate of each partner’s financing needs and takes into account their capacity to finance themselves with their own resources, in particular any international reserves available to them. The amounts made available are as follows:
- Albania: €180 million
- Bosnia and Herzegovina: €250 million
- Georgia: €150 million
- Jordan: €200 million
- Kosovo*: €100 million
- Moldova: €100 million
- Montenegro: €60 million
- North Macedonia: €160 million
- Tunisia: €600 million
- Ukraine: €1.2 billion.
The assistance is in the form of loans with a maximum average maturity of 15 years. The European Commission borrows the necessary funds on the capital markets or from financial institutions and keeps the European Parliament and the Council informed of how the scheme is operating.

Conditions

Partners must, as a pre-condition, respect effective democratic mechanisms, including a multi-party parliamentary system, and the rule of law, and guarantees respect for human rights.
The EU and each partner must agree on economic policy and financial conditions, focusing on structural reforms and sound public finances in a memorandum of understanding (MoU).
The conditions aim to enhance efficiency, transparency and accountability of the public finance management systems in the partners. Rules-based and fair trade are also taken into account. Progress in attaining these objectives is monitored by the Commission.
Before implementing the assistance, the Commission assesses the soundness of the partner’s financial arrangements, administrative procedures, and the internal and external control mechanisms.

Payments

Payment is made in 2 loan instalments, which are guaranteed by the EU budget through the Guarantee Fund for external actions.
The Commission releases instalments, subject to the following conditions:
- fulfilment of the pre-condition;
- a continuous satisfactory track record of implementing an IMF credit arrangement;
- the satisfactory implementation of the economic policy and financial conditions agreed in the MoU.
MFA is made available for a period of 12 months, starting from the first day after the entry into force of the MoU.

Loan agreement

Detailed financial terms are set out in a loan agreement, with the following undertakings:

The partner regularly checks that financing is properly used;
Measures to prevent irregularities and fraud, and take legal action to recover any misappropriated funds;
Protecting the EU's financial interests, in particular in relation to the prevention of, and fight against, fraud, corruption and any other irregularities;
Authorising the Commission, or its representatives, to carry out checks, including on-the-spot checks and inspections;
Authorising the Commission and the Court of Auditors to perform audits, including document audits and on-the-spot audits, such as operational assessment;
Ensuring that the EU is entitled to early repayment where a partner has engaged in any act of fraud or corruption or any other illegal activity detrimental to the EU’s financial interests;
Ensuring that all borrowing and lending costs incurred by the EU are borne by the partner.

FROM WHEN DOES THE DECISION APPLY?

It has applied since 28 May 2020.

BACKGROUND

For more information, see:

Coronavirus: Commission proposes €3 billion macro-financial assistance package to support ten neighbouring countries — press release (European Commission).

KEY TERMS

Macro-financial assistance (MFA): Financial aid extended by the EU to partner countries experiencing a balance of payments crisis. It takes the form of medium/long-term loans or grants, or a combination, available only to countries benefiting from a disbursing IMF programme.

MFA is designed for countries geographically, economically and politically close to the EU, including candidate and potential candidate countries, countries bordering the EU covered by the European Neighbourhood Policy and, in exceptional circumstances, other non-EU countries.

MAIN DOCUMENT

Decision (EU) 2020/701 of the European Parliament and of the Council of 25 May 2020 on providing macro financial assistance to enlargement and neighbourhood partners in the context of the COVID 19 pandemic (OJ L 165, 27.5.2020, pp. 31-37)