Ukrainian officials breathed a sigh of relief on Friday after European leaders agreed to keep their country funded with a $105 billion loan, which will cover a large portion of Kyiv’s financial needs over the next two years and help sustain its war effort against Russia.
“Ukraine has received a financial security guarantee for the coming years,” President Volodymyr Zelensky of Ukraine wrote in a social media post on Friday morning. A day earlier, as tense negotiations over the loan unfolded in Brussels, he had warned that without the money Ukraine would be forced to sharply scale back domestic drone production, undermining its ability to counter Russian assaults.
Some Ukrainian lawmakers lamented Europe’s failure to agree on its first choice of using Russian frozen assets as backing for the loan — an option Kyiv had pushed for months, arguing that Moscow should pay for the destruction it caused. With several European leaders opposing the move, the European Union instead decided to use its budget as collateral.
But for Ukraine, receiving the money matters more than its source. Kyiv faced an imminent budget crunch and deep uncertainty over how long it could sustain its war effort. The interest-free loan, which will cover roughly two-thirds of the country’s financial needs for the next two years, largely resolves both issues.
It also bolsters Ukraine’s position in ongoing peace talks, weakening Moscow’s argument that Kyiv is running out of resources and should settle for a deal now. Mr. Zelensky said Ukrainian negotiators will be in the United States on Friday and Saturday to continue negotiations.
“It significantly strengthens our negotiating position, sending a signal to Putin, who was convinced that Ukraine would be left alone and that he would be able to squeeze it to the end,” said Viktor Taran, a Ukrainian political scientist and a major in the Ukrainian armed forces.
It was not immediately clear when Ukraine would begin receiving the European money, but the country needs it soon to cover the budget gap, which will open in the spring.
Ukraine’s budget for next year projects a $42 billion deficit. About half of that deficit is already covered by committed financial aid from the International Monetary Fund, the World Bank, the European Union and other Western countries. The remaining half, however, had yet to be secured before Europe approved the new loan.
Ukraine also has extra military needs that are not included in the budget. While the official budget projects $66 billion in military expenses next year, the Kyiv School of Economics Institute, a Ukrainian economic think tank, said Ukraine will likely require $100 billion for its defense. The Ukrainian defense ministry said the country would need at least $120 billion.
Without the loan, Ukraine would have been forced to delay payments starting in the spring and cut spending in the second half of next year, according to Nataliia Shapoval, head of the Kyiv School of Economics Institute. She estimated Kyiv would have had to slash 25 to 30 percent of its projected expenditur
