How EU plans to fund Ukraine's needs over next four years

Thursday, 29 February 2024

On 27 February 2024, the European Parliament approved the allocation of a €50 billion macro-financial assistance package to Ukraine within the programme Ukraine Facility – the instrument to provide predictable financial support for Ukraine over the 2024-2027 period.

And in March, Ukraine's government hopes to receive €4.5 billion in transitional financing from the EU within the framework of the new instrument.

Read more about what share of Ukraine's needs Ukraine Facility covers and what requirements the Ukrainian government must meet to receive these funds in the article by Olexandra Betlii, Vitalii Nabok, Aliona Korohod, Maria Repko with the participation of Ihor Burakovskii and Vitalii Kravchuk – Ukraine Facility: how and under what conditions will EU's €50 billion be spent.

Ukraine Facility is a new support instrument for Ukraine from the EU. It is similar to Recovery and Resilience Facility used for financial support to EU member states.

Financial support under such programmes is provided according to approved action plans, in Ukraine's case under the Plan for Ukraine. These plans are initially prepared by national governments with the involvement of the public and business, then coordinated with the EU and have a list of measures to strengthen the economy and macroeconomic stability.

The instrument provides Ukraine with €50 billion for over four years. It is not yet clear when and in what shares, it will be allocated, but there is hope that Ukraine will receive most of the funds at the initial stages (money front-loaded).

Most of the funds are provided through highly concessional loans, which Ukraine will repay over many years.

According to recent reports, the EU may provide Ukraine with €16 billion in 2024, compared to €18 billion in 2023.

These funds are critical to ensuring Ukraine's macro-fiscal stability.

The need for external financing in 2024 amounts to $37.5 billion, and Ukraine Facility can cover approximately half of this amount. These funds are to finance state expenditures unrelated to defence and security.

An advantage of the adopted document is that Ukraine could receive bridge financing totaling €9 billion by June, while €4.5 billion to be obtained in March.

It will allow the government and the European Commission to align the Plan for Ukraine text with the implementation of reforms and changes.

The government must submit the Plan within two months after the entry into force of the Regulation on Ukraine Facility.

The Plan for Ukraine is almost ready as of today.

The lion's share of the transfers will directly depend on the implementation of measures envisaged in the Plan for Ukraine (money in exchange for reforms). These reforms are primarily needed by Ukraine itself and are crucial for economic stability and economic growth.

If Ukraine cannot meet the conditions due to the war, the EU may provide additional financing for up to three months.

But it's not worth counting on it.

Overall, Ukraine Facility is a critically important financial instrument for supporting Ukraine. Its action will be comprehensive and will contribute to boosting reforms in key economic sectors, improving business activity, increasing economic resilience, and accelerating economic growth.

It will also help the country integrate into the European Union.

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