Ukraine ratifies $134 billion EU loan to boost spending on defence
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Ukraine is in the fifth year of its fight against Russia's invasion.
PHOTO: REUTERS
- Ukraine's Parliament ratified a €90 billion EU loan with 298 votes, strengthening resilience after Hungary lifted its veto, said President Zelenskiy.
- €45 billion of the loan will fund defence, energy resilience, and the budget deficit this year, boosting defence spending to a record US$100 billion.
- The EU loan is conditional on reforms, including anti-corruption measures and transparency. Unpopular tax increases for entrepreneurs are difficult to pass.
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KYIV - Ukraine’s Parliament ratified a loan agreement with the European Union on May 28, paving the way for €90 billion (S$134 billion) in financing and allowing the government to channel record funds to defence and the war with Russia now in its fifth year.
Immediately after the vote, President Volodymyr Zelensky thanked the lawmakers and European partners, saying the funds from the EU would strengthen Ukraine’s resilience.
“This was one of the most important votes – one that demonstrates the constructive nature of our joint work and our readiness to hear one another,” Mr Zelensky said.
“Unity in Ukraine is what always works for Ukraine.”
Parliament ratified the loan agreement with the EU with 298 votes, well ahead of the 226 votes required for a majority.
The EU gave its final approval to the €90 billion loan for Ukraine in April after Hungary lifted its veto, ending months of delays and easing pressures on the Ukrainian state budget.
Funds from EU loan to go for defence, resilience
European Commission president Ursula von der Leyen said the vote paved the way for the first disbursements in June.
The government expects to receive €3.2 billion in June and a total of €45 billion this year. The remaining €45 billion would be kept for 2027.
“The funds will be allocated to national defence and security, strengthening energy resilience and covering the budget deficit,” Ukrainian Prime Minister Yulia Svyrydenko said.
“Support from the EU enables Ukraine to maintain macro-financial stability and fulfil its social obligations to its people.”
Parliament also gave its preliminary backing to amending the 2026 state budget to reflect a higher level of international financial aid planned for this year.
Under the Bill, approved in the first reading, the government would spend €31.8 billion from the EU loan for defence efforts and €13.2 billion to cover the budget gap.
That will allow Ukraine’s overall defence spending to rise to a record of about US$100 billion (S$127 billion) this year, up from a previously forecast US$64 billion. Defence spending in 2025 was about US$61.4 billion.
The EU funding would help reduce the 2026 budget deficit to 12.1 per cent of gross domestic product from 18.5 per cent planned initially.
Money conditional on reforms
Payments from the EU loan are conditional on reforms, and any reversal in the fight against corruption could trigger a temporary suspension in aid.
Conditions are similar to what Ukraine agreed with its other major international lender, the International Monetary Fund.
They include increasing domestic revenues, boosting transparency, and ensuring fair and equal conditions for doing business in Ukraine.
Some required measures, like introducing higher taxes for individual entrepreneurs and taxing parcels, are unpopular and would be difficult to get through Parliament as lawmakers say they would undermine small businesses and increase the cost of living.
An IMF monitoring mission is currently in Kyiv for the first review of its US$8.1 billion lending programme. REUTERS
