MEPs approve 1 billion euro loan to Ukraine

Russia’s invasion of Ukraine has provoked a large-scale humanitarian crisis, causing millions displaced and refugees. The combat operations cause constantly increasing numbers of casualties, destruction and displacement within and outside Ukraine's borders. One-third of Ukrainians fled, seeking shelter in the other parts of the country, becoming internally displaced, or moving further away, becoming refugees, mainly in the European Union - writes Anna Van Densky

Ukraine's civilians are being subjected to shelling and violence of the ongoing combat and an estimated one-third of Ukrainians have been forced from their homes, either within the country or to neighbouring European states. By the beginning of July, more than 5.6 million Ukrainian refugees have been recorded across Europe, including Poland (1,207,650), along with Germany (867,000), the Czech Republic (388,097), and Turkey (145,000) and Italy (141,562) . About 90% of refugees are women and children, who are also at a higher risk of violence and abuse, including human trafficking, smuggling and illegal adoption.

However, the numbers of refugees are volatile, because more than 2.5 million Ukrainians have returned home to the parts of the country regarded as relatively safe. However, in the context of the ongoing combat operations, the need for humanitarian aid continues to increase.

At Strasbourg July Plenary the  MEPs gave the green light to a €1 billion macro-financial loan to help Ukraine cover its external financing needs that have been multiplied due to the conflict. According to the various estimates in the long-term, the Ukraine  Government Debt to GDP inclines to raise up to 60% in 2023.

The Members of the European Parliament supported the Commission's proposal to provide Kyiv with an additional loan on highly auspicious terms, on top of €1.2 billion disbursed already in March and May 2022. The current amount is the first tranche of upcoming exceptional macro-financial assistance worth €9 billion.

Ukraine’s external financing needs have grown drastically due to the Russian invasion: besides the tremendous damage to roads, railroads, bridges, factories, houses, hospitals,  and other сrucial infrastructure, the country has also lost its access to the international financial markets. As a result, Ukraine is short $39 billion (€37.3 billion) to meet its financing needs for 2022, according to the International Monetary Fund.

This latest loan serves as “swift financial support in a situation of acute funding needs and to ensure the continued functioning of the most critical functions of the Ukrainian state”, the proposal explains. It will be disbursed in one instalment conditional on fulfilling a variety of criteria including enhanced transparency and reporting on its use. Furthermore, the EU budget will exceptionally finance the interest costs.

A precondition for granting the assistance should be that Ukraine respects effective democratic mechanisms despite the concentration of power in the executive branch during the war, the proposal underlines.

The European Parliament resolution, adopted under the urgent procedure, passed with 522 votes for, 17 against and 25 abstentions.

Macro-financial assistance is an emergency resource, provided on highly favourable terms, for EU neighbourhood countries struggling to honour their financial obligations. The total amount of such exceptional loans from the EU to Ukraine since the start of the war will reach €2.2 billion in 2022, and could reach up to €10 billion if the whole package is agreed upon.

Ukraine's corruption index in 2021 indicated 23% of public services users paid a bribe in the last 12 months, overall Ukraine scores 122 places among 180 countries, where the research took place.

The measure applies on the day following its publication in the Official Journal of the EU.

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