Johannes Hahn – Photo © European Union 2022
(BRUSSELS) – The European Commission set out Wednesday an unprecedented support package for Ukraine of up to EUR 18 billion for 2023, in the form of highly concessional loans, disbursed in regular instalments.
This ‘stable, regular and predictable financial assistance’ – averaging EUR 1.5 billion per month – will help cover a significant part of Ukraine’s short-term funding needs for 2023, which the Ukrainian authorities and the International Monetary Fund estimate at 3 to 4 billion per month. The support put forward by the EU would need to be matched by similar efforts by other major donors in order to cover all of Ukraine’s funding needs for 2023.
Thanks to this package, Ukraine will be able to keep on paying wages and pensions and maintain essential public services running, such as hospitals, schools, and housing for relocated people. It will also allow Ukraine to ensure macroeconomic stability, and restore critical infrastructure destroyed by Russia in its war of aggression, such as energy infrastructure, water systems, transport networks, roads and bridges.
“With this package of proposals, the EU can use its financial standing in capital markets to deliver substantial financial support to Ukraine in a structured and predictable format,” said Budget Commissioner Johannes Hahn: “The diversified funding strategy is a winning formula and the template for all future EU issuance programmes.”
Support under the instrument will be accompanied by reforms, to further enhance the rule of law, good governance, anti-fraud and anti-corruption measures in Ukraine. Therefore, while taking into account the evolution on the ground, financial support will be framed by policy conditions, geared towards strengthening Ukraine’s institutions and preparing the ground for a successful reconstruction effort, as well as supporting Ukraine on its European path.
The funds will be provided through highly concessional loans, to be repaid in the course of maximum 35 years, starting in 2033. In a further expression of solidarity, the EU also proposes to cover Ukraine’s interest rate costs, through additional targeted payments by Member States into the EU budget.
The MFA+ instrument will be accompanied by reforms to help Ukraine advance on its path to becoming a member of the EU. This means that the Ukrainian government will have to complement the financial support with sectoral and institutional reforms, including anti-corruption and judicial reforms, respect of the rule of law, good governance, and modernisation of the national and local institutions. We will check that these reforms have been effectively put in place when paying out the instalments.
To secure the funds for the loans, the Commission proposes to borrow on capital markets using the diversified funding strategy. This would enable the Commission to use the full portfolio of funding instruments to secure market funding on the most advantageous terms, when these are needed.
EU proposal for 2023 Ukraine support package - guide
Communication of 18 May 2022 on Ukraine relief and reconstruction
