EU releases more aid to Ukraine amid embedded corruption

Against the backdrop of increasing tension between Ukraine and Russia the European Commission decided on Friday to approve the disbursement of the first €500 million of the new Macro-Financial Assistance (MFA) programme to Ukraine. With this disbursement, the total Macro-Financial Assistance extended to Ukraine by the EU since the revolution in 2014 will reach €3.3 billion, the largest amount of such assistance directed at any non-EU country. According to the Commission, Ukraine meets anti-corruption conditions.

On 25 November Russia seized three small Ukrainian naval vessels trying to enter the Sea of Azov and is still keeping them and their crews. Commission Vice-President Valdis Dombrovskis said on Friday (30 November) that the “disbursement comes at a crucial moment when Ukraine and its people face a new aggression from Russia and need to see solidarity from international partners.”

Asked by The Brussels Times if the timing of the disbursement was linked to the incident in the Sea of Azov a Commission spokesperson replied that the decision was unrelated to the current situation.

“Negotiations were already ongoing well before the current developments. The Commission has decided to disburse the first tranche of the MFA, because Ukraine has fulfilled the commitments laid down in the Memorandum of Understanding.”

The reform agenda in Ukraine includes further measures in the fight against corruption, such as progress in making the High Anti-Corruption Court of Ukraine operational, public financial management, the continuation of reforms of the energy and banking sectors and reforms in the area of social policy.

The fight against corruption in Ukraine is the main focus of the conditions for macro-financial assistance, according to the Commission. In an evaluation report from March this year the Commission wrote “that the implementation of anti-corruption reforms in recent years has been weak”.

Since then, however, some progress has been made. According to the spokesperson, Ukraine has upgraded and started to operate a verification system of asset declarations of public officials, an information system on company ownership, and has taken the first steps in setting up a High Anti-Corruption Court.

But the Commission admits that it apparently will take more time to finalise these measures and see the first results such as high-level convictions of corrupt politicians and increased citizens’ trust in the authorities. How long time is hard to say.

John Lough, a researcher at Chatham House in London, writes in a recent report based on field studies in April-May on Ukraine’s anti-corruption reforms that the total gain from anti-corruption measures has been estimated to 6 % of GDP but that the transition to an more open and non-corrupt country can take up to 50 years.

“Assuming that the process started in 1991 after independence, Ukraine is at the mid-point of this process.”

“Success in overcoming deeply embedded corruption in a country such as Ukraine, with its formal and informal systems of governance, requires much more than new laws and dedicated anti-corruption bodies,” the report summarizes.

"There are gaping holes in the anti-corruption programme,” John Lough said at a policy dialogue in Brussels last May and exemplified with the decentralisation process in Ukraine. “We don’t know if corruption has moved from central to local levels where it’s more accepted.”

EU assistance to Ukraine

The new MFA programme was approved by the European Parliament and the Council in July 2018. The programme helps Ukraine cover its financing needs and supports the implementation of a wide-ranging structural reform agenda.

The MFA funds are available in the form of low-interest long-term loans, conditional on the implementation of specific policy measures agreed with EU in a Memorandum of Understanding.

In addition to MFA, the EU supports Ukraine through several other instruments. Overall, the EU and European Financial Institutions have mobilised over €12 billion in loans and 1 billion in grants since 2014 to help Ukraine stabilise its economy, carry out comprehensive reforms and improve the livelihoods of its citizens.
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