The EU must provide a reliable financial plan for Ukraine so that the IMF unblocks a new aid package

This was stated by EU Commissioner for Economic Affairs Valdis Dombrovskis, Bloomberg reports.

According to him, the Washington lender, which agreed with Ukraine on a $15.6 billion programme in 2023, needs convincing political guarantees to decide on new funds for Ukraine.

Dombrovskis said that this week in Bulgaria, he discussed Ukraine's financial deficit, currently estimated at $65 billion, with IMF Managing Director Kristalina Georgieva. New support from the EU will unlock an IMF aid package of nearly $8 billion over the next three years. It is expected in January.

The EU may finance aid to Ukraine from russia's frozen assets. Under this plan, known as a ‘reparations loan,’ Ukraine would only have to repay the money once russia pays reparations.

However, the idea faces legal obstacles, primarily due to Belgium's position, which requires additional guarantees to avoid the risks of using nearly €140 billion held at the Brussels-based financial institution Euroclear.

The EU Commission is currently negotiating with Belgium to find a compromise and determine the amount of guarantees. Among other options, raising funds on financial markets is being considered. However, Dombrovskis warned that loans to Ukraine are not the best solution, as the country already has a significant debt burden after more than three years of war.

It is expected that a decision on one of the financing options will be approved at the EU leaders' summit in Brussels next month. This could be the signal the IMF needs to unblock its aid.

Source: Babel