Ukraine Facility will cover recovery, reconstruction, modernisation and reforms necessary for its E.U. accession
The European Commission has welcomed the political agreement reached between the European Parliament and the European Council on a Regulation to set up a Ukraine Facility of € 50 billion to provide stable and sustainable financing to Ukraine.
Of these funds, € 17 billion will be in grants, and € 33 billion will be in loans. The funds would be disbursed between 2024-2027. The new Ukraine Facility will cover recovery, reconstruction, and modernisation, including key reforms necessary for its European Union (E.U.) accession.
The Ukraine Facility was first proposed in June 2023. It is structured in three pillars which include direct support to the State budget based on a plan to be developed by Ukraine for the recovery, reconstruction and modernisation of the country, including a set of related reforms and investments.
The second pillar includes an investment framework to attract public and private investment for Ukraine’s recovery and reconstruction, composed of guarantees and blended finance (a mix of loans and E.U. grants). The third pillar covers technical assistance and other support measures to the reforms, as well as grants covering the borrowing costs of loans to the Government of Ukraine.
Taking it to X, the President of the European Commission – Ursula von der Leyen, tweeted,
Last night’s political agreement on the €50 billion Ukraine Facility is a major step forward.
— Ursula von der Leyen (@vonderleyen) February 6, 2024
Europe is true to its word.
We will continue to deliver much-needed funding and predictability for our brave partner and aspiring member.
We aim to start payments in March.
The Ukraine Facility will be equipped with a robust framework for audit and control, to ensure the protection of E.U.’s financial interests. It will support the further improvement of Ukraine’s system of internal controls as part of the reforms under the plan.
The latest political agreement also paves the way for exceptional bridge financing under the Facility. This means immediate support of up to € 1.5 billion per month for a limited period. The first payments can take place very soon after its entry into force, expected as early as March’24.
This crucial support will ensure that Ukraine can continue focusing efforts on winning the war and will finance the functioning of the state, such as paying salaries, pensions, and providing basic public services.
To finance the loan support, the E.U. will raise € 33 billion on the financial market until the end of 2027 by issuing E.U. Bonds under the unified funding strategy. The non-repayable support will be financed through the E.U.’s annual budget under a new special instrument, the “Ukraine Reserve”.
Going ahead, the political agreement is now subject to formal approval by the European Parliament and the European Council. The regulation of the Ukraine Facility will enter into force the day after its publication in the Official Journal.
