Ukraine signs loan agreement with EU to secure up to EUR 35 bln under G7 initiative

Finance Minister Serhiy Marchenko and the Governor of the National Bank of Ukraine (NBU), Andriy Pyshnyy, on behalf of Ukraine, signed a loan agreement with the European Union to secure up to EUR 35 billion in macro-financial assistance (MFA) as part of the G7 Extraordinary Revenue Acceleration Loans for Ukraine (ERA) initiative using revenues derived from frozen Russian sovereign assets, as reported on the Ministry of Finance's website on Wednesday morning.

"The final amount of the MFA will be determined after all parties to the initiative approve the amount of loans. Taking into account the proposed financing of $20 billion by the United States, the EU's Macro-Financial Assistance could be in the amount of EUR 18 billion," the Ministry said.

According to the press release, the program includes 14 measures to attract MFA. The areas covered include macro-financial stability, state-owned enterprises, public administration, energy, rule of law and anti-corruption, and defense industry.

The agreement was signed on the EU side by Valdis Dombrovskis, Vice-President of the European Commission.

The Ministry of Finance said that these funds are part of the G7 Extraordinary Revenue Acceleration Loans for Ukraine (ERA) initiative, under which a total of $50 billion is planned. The repayment of the loan will be made from future revenues derived from frozen Russian sovereign assets in the EU.

Funds will be provided under the new Ukraine Loan Cooperation Mechanism (ULCM), which will receive emergency revenues from frozen Russian assets and other voluntary contributions made by member states or third countries. These resources will then be used to repay the principal amount of the debt and interest on the relevant bilateral loan agreements of Ukraine with creditors.

"The next important step is to raise funds from the frozen assets of the aggressor country. In recent months, we have been actively working with the European Union and other parties within the initiative to achieve concrete results in meeting Ukraine's financial needs in 2025 and beyond. I am grateful for the constructive cooperation and readiness to implement fair decisions in a short time," said Marchenko.

As reported, the International Monetary Fund, in its updated Extended Fund Facility (EFF) arrangement following the fifth review, indicated that if the war ends at the end of 2025, Ukraine will need $33.1 billion out of the specified $50 billion to support the budget: $19.1 billion next year, $9.2 billion in 2026, and $4.9 billion in 2027. Under the adverse scenario of extending the war until mid-2026, Ukraine's budget will need all $50 billion to cover the deficit.

On November 28, the EU and Ukraine signed a memorandum of understanding on a macro-financial loan of EUR 18.1 billion.

On Tuesday, December 3, the Verkhovna Rada adopted at the final reading bill No. 12232 on amendments to the Budget Code, which will officially regulate the attraction of funds from partners at the expense of income from frozen assets of the Russian Federation.