EU proposes €18 billion loan to Ukraine for 2023

EU proposes €18 billion loan to Ukraine for 2023
A children's hospital in Mariupol after a Russian airstrike. Credit: Wikimedia Commons

The European Commission has proposed an aid package worth €18 billion for Ukraine to be paid out over the course of 2023.

In a press release published on Wednesday, the Commission called the support package "unprecedented", and claimed that it would "help cover a significant part of Ukraine's short-term funding needs for 2023", currently estimated to be around €3 to €4 billion.

The Commission further specified that the loan would be delivered to Ukraine in monthly instalments of €1.5 billion and that its disbursement would be conditional upon various "reforms" being met "to further enhance the rule of law, good governance, anti-fraud and anti-corruption measures in Ukraine."

"We will check that these reforms have been effectively put in place when paying out the instalments," the Commission added.

A 'very favourable' package

The Commission elaborated that the aid package will offer "very favourable" terms to Ukraine.

In particular, the Commission noted that the loan principal will be expected to be repaid over a lengthy (35-year) period starting from 2033, and that "in a further expression of solidarity" the EU would cover the entirety of the loan's annual 3.5% interest payments, for which payment will begin from 2024.

"This 3.5% interest corresponds to ... €630 million euros per year," EU Budget Commissioner Johannes Hahn told l'Echo. "This [only] represents €18 million for a country like Austria or €6 million for Hungary."

According to the EU, the money will primarily be used to "keep on paying wages and pensions and maintain essential public services running, such as hospitals, schools, and housing for relocated people", although "it will also allow Ukraine to ensure macroeconomic stability, and restore critical infrastructure".

"This aid has been shaped according to the needs of Ukraine, to finance its reconstruction and rehabilitation," said Commission Executive Vice-President Valdis Dombrovksis.

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Excluding the current package, the EU has provided €19.7 billion in financial support to Ukraine since Russia's full-scale invasion on February 24.

The latest package, although undoubtedly sizeable, is still significantly less than the €750 billion that Ukraine itself believes is necessary to repair the total damage caused by the war.

The Commission proposal will need to be approved by both the European Council and the European Parliament.

"As always, the Commission will be working hand in hand with all EU institutions concerned for a swift adoption [of the proposal]," the Commission added.

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