EU to offer $54 bn to Ukraine to improve its war-torn economy; here’s the usage breakdown

On Thursday, EU leaders reached an agreement to provide Ukraine 50 billion euros (US$54 million) to support its war-torn economy, following weeks of threats from Hungary to veto the proposal. Arms and ammunition are to be paid for under a different EU scheme; the aid package, which consists of around two thirds loans and one third grants to be distributed over four years, is not meant to finance them.

Rather, it seeks to finance reconstruction, stabilize Ukraine’s economy following almost two years of conflict, and position the nation for potential EU membership. With the deal, Kyiv will be able to close budget deficits without experiencing the severe inflation that followed Russia’s full-scale invasion in February 2022.

In order to pay for governmental spending, the central bank had to print money, which caused inflation to soar and peak at 26%. Although there was little economic recovery in Kyiv last year, the city spends nearly all of its tax money on the conflict.

Nonetheless, remarks made by EU officials, legislators from Ukraine, and diplomats have highlighted the following main areas of concern:

1. Funding state salaries and pensions: This includes compensating civil servants, medical professionals, teachers, nurses, and other workers in the public sector.

2. Maintaining uninterrupted water and electricity supplies as well as other public services: The Ukrainian government must continue to garner support for the fight at home.

3. Strengthening the currency: Former diplomat and politician Bohdan Yeremenko stated to Ukrainian media on Thursday that he anticipated the administration will spend a portion of the money to lessen the pressure on the hryvnia’s decline.

4. Security measures for foreign investments in Ukraine: On Friday, Yevheniia Kravchuk, a deputy from Zelenskyy’s Servant of the People party, told Deutsche Welle, a German broadcaster, that Kyiv plans to utilize a portion of the aid to offer reliable financing and insurance for foreign businesses.’

Zelenskyy expressed gratitude for the support in a post on X, the former Twitter. He asserted that sustained financial support from the EU would bolster Ukraine’s long-term economic stability, emphasizing military support and pressure from sanctions against Russia.