How Ukraine could close its $23bn funding gap
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Ukrainian finance minister Sergii Marchenko is in Brussels today to discuss his country’s funding needs, as Russia’s relentless war puts it in dire need of weapons and funds, writes Paola Tamma.
Context: Ukraine, the European Commission and the IMF are in talks on how to close Ukraine’s growing funding gap, in light of the US ceasing its military and financial support for Kyiv, while European countries face ever tighter budgets.
According to three people familiar with the discussions, Ukraine will need about $23bn next year, in addition to ongoing support programmes. Marchenko will meet EU economy commissioner Valdis Dombrovskis today to discuss ways to close that hole, as well as needs for 2027 and beyond.
“We are right now working on all the modalities, on timings, on volumes. For volumes, it will be important for us also to see the IMF assessment on the finance needs for Ukraine,” Dombrovskis said last weekend.
The IMF did not reply to a request for comment.
Ukraine has requested a new IMF loan, as the current $15.5bn programme expires in 2027.
Meanwhile, the commission is working on a “reparations loan” which would take the cash resulting from frozen Russian central bank assets that matured — currently about €170bn — swap it for EU bonds and loan it to Ukraine.
That would leave Russia’s claim to the assets untouched, thus eschewing the legal and financial risks linked to confiscation, Brussels argues.
“One of the elements of the proposal is to separate the claim from cash balances that have accumulated and provide [a] reparations loan to Ukraine,” Dombrovskis said, but added that the EU would have to give guarantees “for potential liability on Russian sovereign assets”.
While this plan could help Ukraine bridge the gap, a lot of questions still need to be answered. The guarantees would have to be provided by EU countries, which would potentially be on the hook for repaying billions to Russia, something many find unpalatable.
Another issue is that the sanctions immobilising Russia’s state assets need to be rolled over twice a year, with a unanimous decision from EU countries each time. Officials are looking at ways to work around that, but it’s legally difficult, some of them say.