EU presents an unprecedented €50bn aid package for Ukraine: what we know

EU prepares new aid package for Ukraine
EU prepares new aid package for Ukraine

The European Union (EU) is preparing an unprecedented €50 billion financial assistance package for Ukraine. The idea has already been officially announced by the President of the European Commission (EC), Ursula von der Leyen.

Von der Leyen's statement was made on 20 June before the start of an international conference on Ukraine's recovery. According to the head of the EC, the EU budget reserve of €50 billion will "provide prospects and reliability" for Ukraine.

According to her, the funds will be provided for 4 years, i.e. until 2027. The amount will be in addition to the €30 billion that the EU has already allocated to Ukraine since the start of Russia's full-scale invasion of Ukraine in February 2022.

"We are offering Ukraine a credit line of up to €50 billion for the next 4 years. (This will allow - Ed.) to provide predictable financing for Ukraine on its way to the EU together with global partners and the private sector," von der Leyen said.

According to Bloomberg, it is expected that the money will be allocated both in the form of loans and non-refundable grants. However, the funds will be subject to reforms.

It is noted that the European Commission's proposal will help finance the current expenses of the Ukrainian government and pay for urgent reconstruction priorities. The European Commission, according to the agency, wants to avoid "burdensome instruments" for Ukraine's recovery. Therefore, the aid will be offered in the form of grants, soft loans and guarantees, the sources said.

"The aid package comes at a key moment in the war, when Ukrainian troops are launching a long-awaited campaign. The Ukrainian government hopes that the counter-offensive will push Russian troops out of more territory and encourage allies to continue to provide the necessary support," the agency said.

As the Financial Times previously wrote, supporters of the plan say it will help bring financial support for Ukraine to a more stable and predictable level after a wave of criticism for the haphazard and sporadic provision of funds through 2022. The EU also plans to encourage the United States and the United Kingdom to provide Ukraine with similar financial commitments, and Kyiv, according to officials, will have greater confidence in its financial capabilities.

The newspaper notes that the package will be difficult to agree with all EU members, given Hungary's hostile stance, which has already blocked several tranches of financial aid to Kyiv. However, if the package is approved, it will be possible to expand the existing support programme for Ukraine for 2023, which currently stands at €18 billion.

As a reminder, Ukraine's budget for 2023 has a record deficit of 20.6% of GDP due to the war and heavy economic losses. Planned budget expenditures are almost twice as high as planned revenues. Ukraine lacks about USD 38 billion. Kyiv plans to receive this money from its Western partners during the year.

As reported by OBOZREVATEL, thanks to the help of partners, Ukraine's international gold and foreign exchange reserves have reached USD 37.311 billion. This is a record increase in reserves over the past 11 years and is more than the National Bank's reserves before the war - as of 24 February 2022, the NBU's reserves stood at $27.42 billion.

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