EU Proposes Up to $9.5 Billion in Short-Term Funding for Ukraine

The EU money will come through a macro-financial assistance package and will be a long-term, low-interest loan, guaranteed by the 27 member states. The EU will also issue some grants to Ukraine subsidizing the interest rates, European Trade Commissioner

Valdis Dombrovskis

said on Wednesday.

The EU, which has been making significant loans to Ukraine since 2014, when Russia annexed Crimea and a new pro-western government took office in Kyiv, has significantly stepped up its assistance since February’s Russian invasion of the country.

In addition to taking several million Ukrainians into the bloc and providing up to €2 billion in military assistance, it has provided humanitarian assistance to people arriving in the EU and to people who stayed home, spending €4.1 billion in total since the war begun.

However, the assistance hasn’t been nearly enough to plug the growing budget gap faced by Ukraine, whose economy has been devastated by the Russian invasion, which has seen parts of the country seized and others becoming war zones. Ukraine’s agricultural sector, an important part of the economy, has been severely affected by the war, with crops destroyed and grain sales blocked.

The International Monetary Fund has estimated Ukraine needs around $5 billion a month in assistance to keep the country running. The IMF disbursed $1.4 billion of emergency financing on March 9 to Ukraine.

The EU loan proposal comes as a nearly $40 billion bill to help Ukraine has advanced in the U.S. Senate. The U.S. had been prodding Europe to make more money available quickly.

Once approved, Mr. Dombrovskis said, the money could be used to pay wages and pensions, keep hospitals and schools open and provide other basic services.

“As a result of the war, these costs are now far beyond what Ukraine can afford,” he said. “The IMF estimates Ukraine’s balance of payments gap until June at roughly €14.3 billion…That is a staggering amount.”

European Commission President

Ursula von der Leyen

said the EU would start work on a long-term reconstruction plan for Ukraine, which international institutions believe could cost at least $500 billion.

She said the EU will set up a reconstruction platform jointly with the Ukrainian government to begin making plans.

EU officials have said the bloc would look at various options for raising money for the reconstruction effort. That could include having the commission issue bonds, as it did to fund its coronavirus recovery fund. It could also include looking at whether to seize Russian central bank or oligarch assets to help Ukraine, although there are a thicket of legal questions around that.

Ukraine has applied to be a member of the EU, something most officials think couldn’t happen for many years. However, the reconstruction effort would be tied to conditions and reforms—political, legal and economic—which would help Ukraine prepare for possible membership.

The EU is also looking to join with the U.S. and other Western partners on a reconstruction fund.

“These investments will help Ukraine to emerge stronger and more resilient from the devastation caused by Putin’s soldiers,” Ms. von der Leyen said.

Write to Laurence Norman at [email protected]

Corrections & Amplifications
The IMF disbursed $1.4 billion of emergency financing on March 9 to Ukraine. An earlier version of this article incorrectly said the IMF has agreed on a $5 billion loan for Ukraine. (Corrected on May 18)