EU disburses first installment of €1 billion emergency loan to Ukraine

The European Commission disbursed on Monday the first installment of a one billion euro emergency loan to Ukraine. This is macro-financial aid intended to help the country meet its most urgent financial needs and ensure the functioning of its public administration during the war with Russia.

Half a billion euros have been disbursed, and on Tuesday the second tranche of 500 million euros will follow, according to European Commission President Ursula von der Leyen.

Even before the invasion of Ukraine by Russia on February 24, the EU had approved an emergency loan of 1.2 billion euros. Due to the threat of Russian war, Ukraine was already facing significant capital flight and had lost access to markets.

Now that the war has been raging for more than five months, Ukraine has seen its tax and export revenues plummet, while spending has skyrocketed. This is why the EU has come to the rescue of Kyiv by granting it a long-term loan of one billion euros on favorable terms. Thus, the interest costs will exceptionally be covered by the European budget.

To finance the aid fund, the European Commission borrows capital on the markets on behalf of the EU. The European Commission has also provided €50 million in macro-financial assistance to Moldova, including €35 million in long-term loans and €15 million in grants. The economy of Ukraine’s small and poor neighbor is suffering from the war. In addition, the country hosts the largest number of Ukrainian refugees in Europe relative to its population.

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