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EU finalizes $9.5 billion loan package for Ukraine

The new macro-financial assistance program is expected to consist of 25-year loans with a 10-year grace period. Interest will be covered from the EU budget.

EU leaders should meet and discuss a plan for the restoration of Ukraine / photo from UNIAN, Oleg Tereshchenko

in the coming days European Union intends to finalize the details of the financial package to support Ukraine in the amount of 9 billion euros (9.5 billion dollars).

This is reported Bloomberg with reference to three European officials.

The new macro-financial assistance program for Kyiv will consist of 25-year loans with a 10-year grace period for principal repayment. Interest payments are expected to be covered from the EU budget.

The proposal is expected to be finalized this week, officials said, with EU leaders due to meet Thursday and Friday in Brussels to discuss Ukraine’s recovery plan and its bid for membership in the bloc.

The proposed financial package of 9 billion euros will have to be supported by all 27 EU member states and the European Parliament.

The European Commission first offered the latest aid package in mid-May to cover part of Ukraine’s financial needs of around 5 billion euros a month. The Ukrainian government urged its partners to transfer the funds urgently, but the commission and Germany did not agree on the package.

The EU executive insisted on the use of a loan instrument, while Germany insisted on the use of grants in order to avoid increasing the debt burden of Kyiv. Berlin announced a non-refundable contribution of 1 billion euros to Ukraine last May during a meeting of G7 finance ministers organized by Germany.

Some other countries, including Slovakia, also initially wondered if loans were the best way to support Kyiv, according to people familiar with the matter. Other Member States, including Denmark, wondered if grants would undermine Ukraine’s credibility in the markets.

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Another question was how much EU governments would have to offer as guarantees to support loans in the event of a default by Ukraine. The EU is expected to cover 100% of the loan, with member states providing around 8 billion euros. The rest will come from the EU budget, officials said.

The commission is contacting member states to clarify some details related to the guarantees, but remains confident that the first payment will come this summer, an EU official told Bloomberg.

The EU initially sought to finalize the aid plan earlier this month as Ukraine’s financial needs continue to pile up. Under that schedule, the commission planned to start fundraising in the markets next month for the first transfer, the sources said.

The EU planned to hand over three or four more payments before the end of the year, although this would depend on the availability of guarantees and Ukraine’s financial needs, said the people, who requested anonymity because the talks were private.

The financial package is expected to contain a number of conditions that will take into account Ukraine’s current circumstances and will be linked to recovery efforts and prevention of misuse of funds, EU officials said.

As UNIAN reported, on June 9, the European Union announced allocation of additional 205 million euros humanitarian aid for Ukraine. Thus, the total funding of humanitarian assistance and the amount of non-financial support provided by the EU to Ukraine in response to Russia’s illegal invasion exceeded 700 million euros.

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