Funding for Ukraine stalled as EU fails to agree on financial strategy

EU Commissioner for Economy and Productivity Valdis Dombrovskis explained that the European Union must provide Ukraine with a "credible" financial commitment to unlock new funds from the International Monetary Fund (IMF) for the country, as its creditors are rushing to prevent an economic crisis.

Dombrovskis discussed this week in Bulgaria with IMF Managing Director Kristalina Georgieva, Ukraine's $65 billion funding gap, and military needs.

According to Dombrovskis, the Washington-based lender, which in 2023 agreed with Ukraine on a $15.6 billion program, requires a "credible way forward and credible political commitment from the EU" to approve new funds for Ukraine.

"It has to go beyond us just saying: 'Yes, we will do what's needed and we are just debating the options,'" he noted.

The new support from the EU will unlock an IMF assistance package of approximately $8 billion over the next three years, expected to be announced in January.

According to Dombrovskis, using the Russian central bank's immobilized assets to finance a reparation loan for Ukraine remains the preferred option for Brussels.

Under the proposal, Kyiv would have to repay the money only if Russia pays war reparations.

"The sooner the better, both for the IMF program and to cover Ukraine's needs," Dombrovskis said.

Legal obstacles

However, the publication notes that the plan regarding the assets faces legal obstacles, as Belgium continues to insist on additional guarantees to avoid the risk of using about 140 billion euros in cash reserves accumulated in Euroclear, the Brussels-based clearing house.

The EU insists that the assets will not be confiscated, as Russia will retain the right to claim them if it pays compensation for the damage caused to Ukraine.

Nevertheless, Belgium is demanding reliable joint guarantees to avoid being left responsible if any legal challenge arises.

"The clear understanding, also in the commission, is that we need to be serious about those concerns and we need to find a good way to address them," Dombrovskis said, referring to the EU executive body.

Russian assets

Ukraine's international partners have long been searching for ways to cover the state budget deficit for next year. One of the key options is the creation of a reparation loan, which would allow frozen Russian assets to be directed to Ukraine.

At the same time, the European Union has postponed the final decision on the use of these assets. The final discussion of the issue is scheduled for December.

The delay does not create critical risks for Ukraine, as the state's financial needs for 2025 are already secured.