EU extends loan to cash-strapped Ukraine
Cash-strapped Ukraine has secured a crucial European Union loan that will provide a vital lifeline to sustain its wartime efforts this year.
The 90 billion-euro ($106-billion) package was formally approved on Thursday, days after President Volodymyr Zelenskyy announced that the Ukrainian section of the Druzhba pipeline had been repaired and the flow of oil would resume to Slovakia and Hungary, conditions linked to the release of the funds.
Approval had been held up for months amid political friction inside the 27-nation European Union, including resistance from outgoing Hungarian Prime Minister Viktor Orbán, widely seen as the Kremlin’s closest ally in the bloc.
Orbán was defeated in an election earlier this month, clearing the way for a breakthrough in negotiations.
Basic state functions
The funding arrives at a critical moment. The International Monetary Fund estimates that Ukraine faces a financing gap of roughly 136 billion euros ($158 billion) over the next two years.
The EU loan is expected to cover about two-thirds of Ukraine’s funding needs in 2026 and 2027. Without it, officials warn that Kyiv could have run out of resources to sustain basic state functions and its war effort as early as this spring.
The first tranche of funding is expected to be released in the coming months.
Ukraine will have access to 45 billion euros ($53 billion) for the remainder of this year, and 45 billion euros ($53 billion) for all of 2027.
Under the agreement, roughly a third of the funds will go toward budgetary support for Ukraine’s government, while the remainder will be directed to defense, covering weapons procurement and expanding domestic arms production.
EU leaders have agreed that Ukraine will only begin repaying the loan once Russia pays war reparations.
Rather than using Russia’s frozen central bank assets to guarantee the loan, member states opted for a more cautious approach. Instead, European leaders decided that they would borrow the money to lend to Ukraine.
Concerns over potential Russian retaliation and legal challenges led them to keep the assets frozen until Moscow ends its war and compensates Ukraine for the destruction caused.
