EU mulls cheap loan plan for ‘stable’ financing of Ukraine in 2023

BRUSSELS – The European Union on Wednesday unveiled a plan to provide Ukraine around 18 billion euros (dollars) in financial assistance next year in the form of regular payments to help the war-ravaged country maintain its energy and health facilities in operation as well as to finance salaries and pension plans.

The EU’s executive arm, the European Commission, said the aid would involve highly concessional loans worth around 1.5 billion euros every month, possibly starting in January. Ukraine would not have to repay the funds for at least a decade and EU member countries would cover the interest costs.

The International Monetary Fund estimates that Ukraine will need $3-4 billion every month in 2023. The contribution from the 27 EU countries will be matched by the United States, while other donors and financial institutions are expected to fill the gap.

“Ukraine needs our help,” Commission Executive Vice-President Valdis Dombrovskis said as he unveiled the plan. He said the Kyiv government needed “stable and predictable” funding. At the same time, the EU expects it to tackle fraud and corruption more effectively and strengthen the rule of law.

The commission intends to borrow money from the capital markets using the combined weight of the 27 countries to secure more favorable terms. Part of the effort would involve restructuring part of the EU’s long-term budget, and that requires the unanimous approval of member countries.

Dombrovskis urged EU countries and the European Parliament to approve the plan before the end of the year, so that the first loans could be granted in January. “It needs to be decided quickly, 2023 is fast approaching and Ukraine’s funding needs are urgent,” he said.

The EU has been accused of being too slow in providing funds to Ukraine, even though it has earmarked more than 19 billion euros for the country since Russian forces invaded in February.

Hungarian Foreign Minister Peter Szijjarto said this week that his government would continue to provide financial support on a bilateral basis, but opposed the EU taking out credits to help Ukraine. Dombrovskis said he would work with Hungary to try to overcome their objections.

The EU intends to provide an additional €2.5 billion to Ukraine this month, and another €500 million in December.