EVOLUTION OF THE FORMS OF FUNDING MFA PROGRAMS FOR UKRAINE

Abstract

Since the first days of Russia's invasion, the European Union has been supporting Ukraine in the humanitarian, economic, military and financial spheres. The purpose of the article is to trace the changes in the conditions for the use of funds raised by the EU in the financial market and provided to Ukraine during the first years of the war under macro-financial assistance programmes (Emergency, Exceptional, Plus), as well as the recently approved Extended Fund Facility for Ukraine. Methodology. The study is based on a comparative analysis of two interrelated attributes: EU loans and grants provided to Ukraine during the full-scale war, and the design of EU bonds issued in 2022-2024. The results of the analysis show that (i) the fundamental differences from previous EU loans to Ukraine are the increase in the volume and maturity of loans and grants, accompanied by the EU assuming responsibility for debt servicing, which reduces these costs for Ukraine to zero; (ii) two modifications were identified in the way funds are raised: (1) in the financing strategy (from back-to-back to a diversified and unified financing strategy) and (2) in the risk management tools and procedures necessary to protect EU bondholders. Overall, all the changes discussed contributed to the creation of a flexible financial instrument adapted to the challenges of supporting a country at war, while ensuring predictability and accountability of the use of funds. Practical implications. The results of the analysis could help to increase the confidence of (i) EU bondholders in the safety of their securities and (ii) investors in Ukraine in the prospects of participating in Ukraine's recovery. Value/Originality. Given that the events are happening in real time, as far as the authors know, there is no published research on this topic.