A $50 billion loan to Ukraine from major industrialized G7 nations is moving forward after months of negotiations, with countries announcing their contributions to the deal this week.
The loan program aims to provide Ukraine with an economic lifeline through $280 billion in Russian assets frozen since Russia’s invasion of Ukraine in February 2022. Under the plan, the loan will be repaid with accrued interest on frozen Russian assets rather than confiscating Russian assets. frozen assets themselves.
This “creative” solution aims to provide Ukraine with urgently needed economic assistance “without adding to the burden on American taxpayers,” US President Joe Biden said in a statement, adding that “these loans will support the Ukrainian people in their defense and reconstruction. country. And our efforts make it clear: tyrants will be responsible for the damage they cause.”
“This will really support us,” Ukrainian President Volodymyr Zelenskyy said in a statement thanking allies for the decision.
The United States will contribute $20 billion to the loan, while Canada and Britain have announced contributions of $3.7 billion and $2.94 billion, respectively. The European Parliament on Tuesday approved a European Union decision providing for a loan of up to $38 billion.
While details of the loan are still being worked out, donors have announced that the financing will cover Ukraine’s economic and defense needs. US Deputy National Security Advisor Daleep Singh told reporters that if the US Congress approves the loan contribution, the Biden administration plans to allocate half of the $20 billion to support the Ukrainian economy and the other half for defense support.
The UK’s $2.94 billion is to be used only for the Ukrainian army, British Defense Minister John Healey announced this week.
“With this decision, Ukraine is confident that it will have the money to fully finance crucial expenses next year, including salaries of teachers, doctors and pensions,” said Roman Kachur, deputy executive director. for Ukraine at the World Bank, at VOA.
According to the International Monetary Fund, this loan is crucial for Ukraine to meet its financing needs.
“We have discussed with (the) Ukrainian government ways to close the funding gap, which has widened because the war is lasting longer than expected and therefore more budgetary funding will be necessary,” Alfred Kammer, director of the IMF’s European Department. , told VOA.
The fund, which has a four-year program for Ukraine, hopes the multi-year financing through the loan will help the country close a financing gap that now exceeds $150 billion, Kammer added.
Washington economist Anders Aslund called the loan plan “excellent,” posting on X: “Finally, Ukraine is on the verge of getting proper financial support. »
The G7 decision was criticized for not resulting in an outright seizure of frozen Russian assets.
“I don’t think we should celebrate this because Ukraine will not receive the underlying $330 billion,” economist Timothy Ash of BlueBay Asset Management said in an email to VOA. Ash blamed “special interests in Europe” for blocking the decision to seize the assets.
The plan to split loan financing between economic and military support worries some observers in Ukraine.
“Previously the discussion was that the funding would be used to finance economic stability. Now we have the impression that the funding will also be used for defense support,” Oleksandra Betliy, chief researcher at the Kiev Economic Research Institute, told VOA. “That’s good for next year, where the budget deficit is $38 billion, but the problem is with the 2026 budget.”
She added that Ukraine’s financing needs will remain high in the coming years.
“Even if 2026 is victorious, we will have to finance the army more to make it strong, and social benefits will be even higher than today,” she said.
To ensure transparency and accountability, loan funding will be distributed through an intermediary fund set up by the World Bank, which Singh said is “subject to robust accountability and transparency measures.”
Kachur agreed, saying the World Bank’s control over funding would eliminate any perception of abuse. Furthermore, according to Ukrainian officials, the money will not be reused once it is transferred to World Bank funds.
“Even if there is a change in political will, these funds will remain available to Ukraine and will be transferred only to Ukraine,” Kachur said.
Details of the loan have not yet been finalized. G7 finance ministers plan to discuss the loan on the sidelines of the annual meetings of the IMF and World Bank in Washington this week.
