European Union eyes cheap loan plan for 'stable' Ukraine funding in 2023

The European Union on Wednesday unveiled a plan to provide Ukraine with around 18 billion euros (dollars) in financial aid next year in regular payments to help the war-ravaged country keep its energy and health care facilities running as well as to fund salaries and pension schemes.

The EU's executive branch, the European Commission, said the aid would involve loans with extremely favourable terms worth around 1.5 billion euros every month, possibly starting in January.

Ukraine would not have to reimburse the funds for at least a decade and EU member countries would cover the interest costs.

The International Monetary Fund estimates that Ukraine will need 3-4 billion dollars each month in 2023. The 27-nation EU's contribution will be matched by the United States, while other donors and financial institutions are expected to plug the gap.

Ukraine needs our help, said Commission Executive Vice-President Valdis Dombrovskis as he unveiled the plan. He said the government in Kyiv needs stable and predictable funding. At the same time, the EU expects it to better tackle fraud and corruption and strengthen the rule of law.

The commission intends to borrow the money on capital markets using the combined weight of the 27 countries to secure more favourable terms. Some of the effort would involve restructuring part of the EU's long-term budget, and this requires the unanimous approval of member countries.

Dombrovskis urged EU countries and the European Parliament to approve the plan before the end of the year, so that the first loans can be provided in January. It needs to be decided quickly, 2023 is approaching fast and Ukraine's financing needs are urgent, he said.

The EU has been accused of being too slow to deliver funds to Ukraine, even though it has earmarked more than 19 billion euros for the country since Russian forces invaded in February.

Hungary's foreign minister, Peter Szijjarto, said this week that his government would continue to provide financial support on a bilateral basis but that it opposes allowing the EU to take out credit to help Ukraine. Dombrovskis said he would work with Hungary to try to overcome its objections.

The EU intends to provide an additional 2.5 billion euros to Ukraine this month, and 500 million more in December.