From a financial discipline point of view, the EU prefers to provide assistance in the form of loans rather than grants. The EU is a high-rating borrower on the international markets and all the main credit-rating agencies consider it to have a very low default risk (see Table 1). Therefore, it can borrow at a very favourable rate and lend to the assisted countries on the same terms. Grants, meanwhile, come from the EU budget and have to respect the limits set by the budget appropriations of the multi-annual financial framework. Nevertheless, in the last two multi-annual financial frameworks (i.e. since 2007), the resources allocated for grant payments have almost never been exhausted and have stayed well below the ceilings, while grants have represented only around 10 % of total macro-financial assistance (see Figure 3).
Loans are theoretically guaranteed by the total EU budget. In practical terms, they are guaranteed by the Guarantee Fund for external actions, which also covers external loans granted by the European Investment Bank (EIB) and Euratom. The guarantee fund is provisioned by the EU budget at a rate of 9 % of every new outstanding liability. The provision happens at the end of each year with a two-year time-lag, which means that the provision for 2017 is 9 % of the total amount lent during 2015. It is worth noting that until now, no country has ever defaulted on an MFA loan. Figure 3 shows the distribution of MFA between loans and grants and the relationship between approved and disbursed assistance.