This emergency loan will serve to cover the basic needs of the country, hit by the consequences of the war
The European Union has reinforced this Tuesday its economic support to Ukraine. The Twenty-seven have given the green light to a macro-financial program of 1,000 million euros so that the country can cover its basic financing needs. This amount, added to the 1,200 million granted in emergency loans in the first half of the year, brings the financial support of the EU to 2,200 million since the beginning of the war.
This aid, adopted by the European Council, aims to cover the “most urgent” financing needs for the country (pay pensions, salaries of public officials…), so that they can continue to function despite the conflict. The war has already destroyed 30% of Ukraine’s economy and has left a huge hole in the public coffers. More specifically, according to data from the International Monetary Fund, the country will need some 37.3 billion euros to cover its financing needs this year.
The European program will work as a long-term loan “on very favorable terms” and will be backed by 70% of reserved amounts charged to the budget of the European Union. The aid is conditional on kyiv carrying out a series of reforms and offering greater transparency in the management of the funds.
At the first meeting of Ministers of Economic Affairs and Finance under the Czech presidency, Zbynek Stanjura -the Czech representative- welcomed the adoption of this aid package: «Continuing material and financial aid to Ukraine is not an option. It is our duty », he assured.
The European Commission proposed in May that the financial support through this mechanism reach up to 9,000 million euros, but in the absence of Brussels making a specific proposal, only this first disbursement of 1,000 million has been carried out. After obtaining the approval of the Council and the European Parliament, the Community Executive must sign the Memorandum of Understanding and the loan agreement with the Ukrainian authorities to set the objectives and reforms to which this aid will be subject.
The 1,000 million will be disbursed in a single installment and are part of the “extraordinary international effort launched by the international financial institutions to support Ukraine,” according to the European Council in its statement. These funds are also complemented by other European humanitarian aid, development and defense initiatives.
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