IMF assistance to Ukraine in jeopardy — Politico
Photo: IMF aid to Ukraine is under threat (Getty Images)
The European Union fears that the International Monetary Fund may cancel financial support for Ukraine if Belgium does not agree to support the EU's €140 billion reparations loan, Politico reports.
IMF may refuse to provide funding
According to the agency, Belgium's refusal to participate in the multi-billion-dollar loan could cause the IMF to block further aid to Kyiv. This, in turn, could lead to a cascading loss of confidence in the economic stability of Ukraine, which continues to struggle with the consequences of Russia's full-scale invasion.
European supporters of the plan emphasize that IMF support is critical to Ukraine's financial viability. They fear that time is running out for decisions, as the Fund is considering granting Kyiv a new loan of $8 billion over three years.
IMF's dependence on EU's decision
IMF financial assistance depends on the European Union's ability to secure its own €140 billion loan, which is to be secured by frozen Russian assets, most of which are held in Belgium.
The European Commission believes that the conclusion of this agreement will convince the IMF of Ukraine's financial capacity in the medium term, which is a key condition for granting new loans.
Belgium blocks initiative
Last month, Belgium opposed the proposal at a meeting of EU leaders, citing financial and legal risks. This reduced the chances of the loan being approved before the IMF's scheduled meeting in December.
"We are facing a timeline issue," said one EU official.
The next leaders' summit is not scheduled until December 18-19, leaving little time for a decision.
EU expects more pressure due to US aid cuts
As the US cuts its support for Ukraine, the IMF expects the EU to bear the main financial burden in the coming years. Although the IMF program for Ukraine is not large, its approval is an important signal to investors about the stability of the state and the continuation of reforms.
"It’s a benchmark for other countries and institutions to evaluate whether Ukraine is doing proper governance," a Ukrainian official explained.
According to Politico, IMF experts will visit Kyiv in November to discuss a new three-year program.
Key role of reparations loan
During the last summit, EU leaders removed the reference to the €140 billion loan from the Council's official conclusions at Belgium's request.
Instead of specific actions, the document only invites the European Commission to present options for financial support as soon as possible, which, according to diplomats, will not satisfy the IMF's requirements for stability guarantees.
European officials believe that to maintain the Fund's confidence, it is necessary to reveal a legal proposal for the loan or hold an extraordinary summit.
Ukraine does not have to repay
Brussels insists that Ukraine will not have to repay these funds in the coming years. The idea is that the loan should be repaid by Russia only after the war is over and reparations are paid to Kyiv.
"There is no universe in which Ukraine needs to come up with the money itself. It either gets the money from Russia or doesn’t give it back. As far as Ukraine is concerned, it’s a good as a grant," the agency quotes an EU official.
Belgian Prime Minister Bart De Wever halted EU plans to seize frozen Russian assets and grant Ukraine a €140 billion loan.
Following this, the European Union postponed until December its decision on using frozen Russian assets to provide aid to Ukraine.
