Ukraine asks for more stable financial support from the EU

Ukraine demanded that the EU provide a stable and predictable flow of financial support to keep its government functioning, warning that Kyiv was “pressed by uncertainty” over cash flow.

The call comes as the European Commission struggles to agree on a strategy to clarify its economic assistance to Ukraine over the coming year despite urgent pleas from Kyiv and Washington to clarify its approach.

“Of course we want a more structured and predictable process [from the EU]said Olha Stefanishyna, Ukrainian Deputy Prime Minister for European Integration. “We are waiting for the commission.

“It depends on whether teachers will get their salaries, whether medical or social workers and pensioners will be paid, whether we can carry out our government functions,” she said between meetings in Brussels used to lobby civil servants. the EU on their slow support. “We hope that lessons will be learned and that we will not be pressured by uncertainty.”

Kyiv is counting on $38 billion in budget support from international partners in 2023, or about $3.5 billion per month.

Stefanishyna welcomed the US decision to provide monthly budget support to Kyiv and called on the EU to take a similar step. But, so far, there is little clarity on how a more predictable funding plan will work, diplomats and bloc officials say.

“There are a lot of questions about how the EU is going to handle funding for Ukraine and few of them are resolved,” said an EU diplomat. “How much do you need? Should funding consist of loans only or a combination of loans and grants? Where will the money come from when national budgets are constrained? And how to move away from recent discussions on MFA [macro financial assistance] and establish a more stable and predictable source of funding? »

EU aid to Ukraine since Russia launched its full-scale invasion in February has been subject to repeated delays as member states haggle over loan terms. The EU granted an emergency MFA loan of 1.2 billion euros in the spring, before announcing its intention to advance an additional 9 billion euros.

But the bloc only transferred €1 billion from the new funding round. He has agreed to pay 5 billion euros in three tranches by the end of the year, with no fixed timetable for the remaining 3 billion euros. Washington has already provided $8.5 billion in economic aid to Kyiv.

Kyiv has been infuriated by slow disbursements from the EU, forcing it to ask its central bank to print money for the budget at the risk of triggering hyperinflation.

“Whenever we don’t have that predictability, whatever we receive is treated as a surprise or a gift,” Stefanishyna added.

Finance Minister Sergii Marchenko said Ukraine’s short-term budget needs were covered for 2022 as long as the EU paid the full €9 billion. But plans for next year were “vague”, he added.

The United States privately pushed senior EU officials to step up fundraising efforts at UN meetings last month. “Predictability is very important to us. That is why we welcome the pressure from the United States on our EU colleagues to make commitments for next year,” Marchenko said.

President Volodymyr Zelenskyy has appealed for an IMF support package of at least $20 billion and talks between Kyiv and the fund have intensified in recent weeks. A sticking point is the setting of structural adjustment targets given the enormous uncertainties surrounding the war.

Kyiv says it will need an additional $17 billion next year to fund urgent reconstruction of homes and schools.

The finance minister said his priority was to secure budget support for the first three months of next year and that he could not start talks on reconstruction funding until he had it not done. Germany is planning a reconstruction conference on October 25.

Some diplomats fear that non-EU donors will be discouraged if the commission takes center stage in the overall fundraising effort. Ukrainian officials say they want the EU to appoint a single person or office to act as its interlocutor for reconstruction aid.

“We don’t know who to talk to there, who is financially responsible,” said Dmytro Natalukha, chairman of the Ukrainian parliament’s economic affairs committee.

Without reconstruction aid, Ukraine’s economy would never recover, Natalukha said: “If we don’t get it, we’re screwed. There is no war without economy. . . You are not trying to cure the patient. You keep him on life support.

A commission spokesperson said: “We are aware that Ukraine’s short-term financing needs will continue beyond 2022. We continue to support Ukraine and will work with Member States to discuss a strategic approach.

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