The European Union has approved a 90-billion-euro loan to Ukraine, providing essential funds that help avoid drastic cuts to public services. However, Ukraine may need additional funds to meet its military expenses for the year, as the country faces a significant budget deficit of approximately 1.9 trillion hryvnias ($43 billion) in 2026. Economists believe that this estimate underrepresents the war’s financial impact. According to Maksym Samoiliuk from the Centre for Economic Strategy, the loan will help address military budget pressures, especially with expected personnel salary increases.
Only half of the approved loan will be available to Ukraine this year, while the remainder is set for 2027. A large part of the funds is allocated for military needs, with about 17 billion euros each year designated for essential public services like health and education. Additionally, over 20 allied nations support Ukraine’s military through a program that funds U. S.-made weapons.
Hungary initially blocked the loan, claiming Ukraine was slow to repair a pipeline damaged by a Russian drone, which carries oil to Hungary and Slovakia. The approval of the loan came after oil flow resumed following Hungary’s Prime Minister Viktor Orban’s recent election defeat. Yuliya Markuts from the KSE Institute estimated that Ukraine’s defense budget would need to be increased by up to 10 billion euros based on frontline developments. Last year, Ukraine raised military spending forecasts, funded partly through government bonds and the Extraordinary Revenue Acceleration loans initiated by the G7.
Economists warn that without the EU loan, Ukraine might run out of money by June, leading to severe service cuts. Many Ukrainians feel relieved after the EU aid package approval, citing its importance for stability and public service continuity. This loan is repayable only if Russia fulfills war reparations to Ukraine, but President Volodymyr Zelenskiy has stated that even with this assistance, Ukraine requires extra financial support to continue the war effort.
Zelenskiy noted that the loan only enables Ukraine to purchase 60% of the weapons produced domestically and called for 5 billion euros to enhance the electricity sector. Despite allies’ investments in military programs, he mentioned a need for 15 billion euros for defense. Recognizing that the EU’s loan does not cover all financing needs, Economy Commissioner Valdis Dombrovskis stated that more funding is necessary for future years. Ukraine will also receive 2.7 billion euros from the EU’s Ukraine Facility and a four-year, $8.1 billion IMF loan, although these funds come with strict governance and tax reform requirements. The IMF recently delayed implementing a VAT on entrepreneurs after pushback from parliament. Samoiliuk emphasized the importance of sustaining reform momentum and noted that international partners must encourage Ukraine to pursue these necessary changes.
With information from Reuters
