EU tells Ukraine to focus on reforms to unlock funding, as Kyiv faces mammoth budget hole
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Ukraine is facing a US$20 billion (S$25.5 billion) budget deficit and is pressing the EU to speed up installments on a €90 billion (S$130 billion) loan that is meant to keep the war-torn country afloat to the end of 2027.
PHOTO: EPA
- The EU urges Ukraine to continue reforms to unlock billions in funding amid a large budget shortfall, stressing that reforms build trust and ensure effective use of support.
- Ukraine faces a US$20 billion deficit this year and seeks faster EU payments, but EU demands clearer explanations and reform progress before releasing more funds.
- EU explores options like advancing loan payments and tapping frozen Russian assets, while calling on other allies to help cover Ukraine's financing gap for a stable state.
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BRUSSELS - The European Union told Ukraine on Sept 29 to continue reforms in order to unlock billions in funding this year, as Kyiv warns it faces a mammoth budget shortfall.
Brussels is currently paying out instalments of a €90 billion (S$130 billion) loan that is meant to help the war-torn country keep afloat to the end of 2027.
But Ukraine’s government has said it still needs some US$20 billion (S$25.5 billion) to cover a yawning deficit this year and has urged the EU to speed up the payments.
EU officials say they are looking into options for Ukraine’s funding needs.
But they say Kyiv has not fully explained its figures for the shortfall and should first focus on pushing through reforms to unlock funds already on the table for this year.
“Our message to our Ukrainian friends is clear – deliver the agreed reforms, so we can continue supporting you financially,” EU enlargement commissioner Marta Kos told a gathering of donors with Kyiv in Brussels.
“Reforms matter. They build trust. They give Ukraine’s partners confidence that our support is being used effectively.”
In a letter to Ukraine’s parliamentary speaker this month, Brussels said, “over 20 billion euros in EU financial assistance remains available” for Kyiv before the end of 2026 provided that it carries out reforms.
Black hole
Coming against a backdrop of a string of high-profile corruption scandals in Ukraine, diplomats in Brussels say there is a greater scrutiny of the demands from Kyiv.
They insist there is still a firm willingness to ensure there is enough money to see the country through a tough winter.
In an interview over the weekend, Ukrainian Prime Minister Sergiy Koretsky told local media the deficit was US$27 billion, but Kyiv would find US$7 billion from savings domestically.
One option for the 27-nation EU to plug the black hole could be bringing forward more payments under the €90 billion loan.
But that could cause the fund to run dry sooner than expected before the end of 2027.
With expectations growing that Ukraine will eventually need more funds, several EU countries have revived calls to tap frozen Russian central bank assets.
So far, there has not been real progress on the issue as Belgium, where the bulk of the money is held, is still firmly opposed.
The EU, meanwhile, is also trying to push other supporters of Ukraine such as Britain, Canada and Japan to also help plug the financing gap.
“The coming months will require action from all of us. We need to give Ukraine the predictability it needs to keep the state functioning,” Kos told the donor meeting.
“We are delivering our share.” AFP