The Cabinet of Ministers of Ukraine has approved the Plan for the Ukraine Facility. This was announced by Prime Minister of Ukraine Denys Shmyhal. It is necessary for the implementation of a four-year financial support program from the EU worth €50 billion. In fact, it is the basis for providing assistance. The Prime Minister said that the Plan contains structural reforms, which correspond to more than 100 quarterly indicators. By implementing them, Ukraine will be able to receive about EUR 16 billion this year. 

These include public administration reform, the fight against corruption, economic and sectoral reforms in various areas, including energy and agriculture. In addition, the document outlines cross-cutting areas such as the “green” transition, digitalization, and European integration. Oleksandra Betliy, an expert at the Institute for Economic Research and Policy Consulting, analyzed the available information and shared the advantages and risks of the Plan.

The Ukraine Plan provides for many reforms that Ukraine plans to implement over the next four years. For implementing these reforms, we will receive an important bonus – EUR 38 billion of budget support from the EU under the Ukraine Facility. Out of the €38 billion, we are to receive €4.5 billion unconditionally in March, then another €1.5 billion in April if we fulfill two more of the five conditions, and another bonus in May – unconditional funding (at least €1.5 billion) for the approval of the Ukraine Plan.

Now the document is being evaluated by the European Commission and must be approved by the EU member states. However, according to the expert, important nuances should be taken into account:

• “The difference with traditional macro-financial assistance is that tranches are tied to the fulfillment of certain indicators (there are 150 of them for the next four years, and they are different).
• If an indicator is not met on time, Ukraine does not receive a bonus for it in the form of euros on the government’s account. This is extremely risky, because now every cent is very important for financing priority expenditures. However, there is still some flexibility: we have exactly one year to catch up and meet the indicator, and then the money is burned.
• In no case should we play around and postpone the fulfillment of the indicators: we need all possible funding to bring the budget together.

There are two other components of the Mechanism for Ukraine: almost €7 billion of investment framework and €4.8 billion of technical assistance and interest compensation. But to get them, we also need reforms. First of all, what kind of investors will come to us and who will invest money if judicial and law enforcement reforms are not finally carried out? Let’s not forget about the Economic Security Bureau of Ukraine. Secondly, one of the reform areas is public administration, and this is especially important because only a capable civil service will be able to develop the necessary solutions in time and implement them effectively.

The program also provides for a special investment instrument to cover risks in priority sectors, which will amount to EUR 8 billion. Investors will be able to receive funding under this instrument through the EBRD, EIB and other international institutions. It is expected that the implementation of projects under this instrument will attract an additional EUR 30 billion in investments. In addition, the budget of the Ukraine Facility program provides for a separate area of technical support, including funds to cover interest on loans under the Ukraine Facility, which will amount to EUR 3 billion.