The European Union must provide a credible financial plan for Ukraine so that the International Monetary Fund (IMF) can unlock a new $8 billion aid package.
This was stated by EU Commissioner for Economic Affairs Valdis Dombrovskis, Bloomberg reports.
According to him, the Washington-based lender, which agreed with Ukraine on a $15.6 billion program in 2023, needs convincing political guarantees to make a decision on new funds for Ukraine.
Dombrovskis said he discussed Ukraineʼs fiscal deficit, currently estimated at $65 billion, with IMF Managing Director Kristalina Georgieva in Bulgaria this week. The new EU support will unlock an IMF aid package of nearly $8 billion over the next three years. It is expected in January.
The EU could finance aid to Ukraine from frozen Russian assets. Under the plan, known as a “reparations loan”, Ukraine would only have to repay the money once Russia pays reparations.
However, the idea has legal obstacles — primarily due to Belgiumʼs position, which requires additional guarantees to avoid risks of using almost €140 billion stored in the Brussels financial institution “Euroclear”.
The EU Commission is currently negotiating with Belgium to find a compromise and determine the size of the guarantees. Other options include raising funds on financial markets. However, Dombrovskis warned that loans to Ukraine are not the best solution, as the country already has a significant debt burden from more than three years of war.
EU leaders are expected to approve one of the financing options at a summit in Brussels next month, which could send the signal to the IMF that it needs to unlock aid.
What is a "reparation loan"?
The possibility of providing Ukraine with a €140 billion loan using frozen Russian assets has been discussed since early October. At that time, EU leaders were unable to agree on the loan — Belgium opposed it, and France and Luxembourg were concerned about the legal consequences.
The European Commission has proposed providing Ukraine with a loan using Russian state assets held in “Euroclear”, a Belgian financial institution. Under the plan, if Russia refuses to pay reparations to Ukraine after the war, it will lose rights to these assets.
Belgium opposed the plan out of concern that Russia would sue it if it went ahead. Belgian Prime Minister Bart de Wever asked the other 26 EU countries to guarantee coverage of legal and financial risks.
Politico reported on October 21 that EU ambassadors had tentatively agreed on a plan to provide a “reparations loan” for Ukraine. However, at a meeting on October 23, EU leaders did not agree to allocate the loan and postponed the issue until December.
Meanwhile, according to Bloomberg, Russia has prepared a response to the Westʼs possible "reparations loan" to Ukraine — it will nationalize foreign assets.
Author: Anastasia Zaikova
For more news and in-depth stories from Ukraine, please follow us on X.