The European Commission is considering the International Monetary Fund’s assessment of Ukraine’s financing needs over the next two years to determine the size of an EU “Reparations Loan” to Ukraine. This loan aims to help Ukraine manage its finances during the ongoing war. EU Economic Commissioner Valdis Dombrovskis stated that the loan would use frozen Russian assets without affecting Russia’s claims on those assets. The Commission is currently working on the details, including timing and loan amounts, expecting a proposal by October.
Around $300 billion in Russian central bank assets are frozen in G7 countries, primarily in Belgium. Much of this has converted to cash as securities matured after being frozen at the start of the Ukraine invasion in February 2022. However, it is uncertain how much can be utilized for the Reparations Loan. Dombrovskis mentioned that this loan model could be replicated across G7 countries with frozen Russian assets, and discussions have been held with G7 finance ministers.
Details of the loan plan remain limited, but it is suggested that Ukraine would only repay once it receives reparations from Russia for war damage, with risks being shared among EU governments. The scheme may involve issuing zero-coupon bonds backed by participating EU countries. Belgian Finance Minister Vincent Van Peteghem expressed skepticism about the plan, noting the risks involved.
With information from Reuters