European Commission Proposal: EUR 35 billion in EU Macro-Financial Assistance on a Non-refundable Basis

Today, during her visit to Kyiv, European Commission President Ursula von der Leyen announced a proposal to provide Ukraine with up to EUR 35 billion in Macro-Financial Assistance (MFA) for 2024-2025. 

The funds will be repaid solely by future flows of extraordinary revenues stemming from the immobilization of russian sovereign assets held in the European Union. Thus, all MFA funds for Ukraine will be on a non-refundable basis. Internal financial resources will not be used for repayment.

The European Commission proposed the establishment of the Ukraine Loan Cooperation Mechanism (ULCM), which would provide MFA on a non-refundable.

This decision is part of the G7's initiative (not an alternative) to boost Ukraine’s budget through the Extraordinary Revenue Acceleration Loans for Ukraine (ERA Loans). 

How Will the Ukraine Loan Cooperation Mechanism Work?

The ULCM will allow the use of proceeds from frozen russian sovereign assets to cover the principal, interest, and other costs of the MFA loan. That is, the funds will be non-refundable for Ukraine.

The European Council concluded that russia’s assets should remain immobilised until russia ceases its war of aggression against Ukraine and compensates it for the damage caused by the war. This represents a commitment to maintain the immobilisation of the assets until such time as compensation from russia is available to pay off the loans. 

How Will the Funds Be Used?

Ukraine will have the flexibility to decide how to allocate the funds. While not tied to specific expenditures, the assistance will help address Ukraine's most pressing needs.

When Will Ukraine Receive the MFA?

The proposal will come into force after approval by the European Parliament and the Council of the EU. The funds may be available in the coming months. 

Minister of Finance of Ukraine Sergii Marchenko on the European Commission's proposal:

“This is an unprecedented and just decision to help restore peace in Europe. I am deeply grateful to the European Commission for understanding Ukraine's needs and its proactive stance. EUR 35 billion is a crucial investment to maintain our financial stability and strengthen our ability to resist the enemy. Importantly, this proposal envisages that investment will be covered by revenues from the frozen assets of the aggressor country—the very country responsible for Ukraine's economic and financial losses. Confiscation of all frozen assets of the russian federation should remain on the agenda. The use of profits is one of the first steps on this path.”

Additional information

At the G7 Summit in Italy on June 14, 2024, leaders agreed to provide Ukraine with around USD 50 billion, which will be repaid by future flows of extraordinary revenues stemming from the immobilization of russian sovereign assets held in the European Union and other jurisdictions.

Currently, the EU holds EUR 210 billion in frozen assets from russia's central bank, which constitutes the majority of such assets worldwide. Depending on the level of interest rates, the extraordinary revenues are currently estimated at up to EUR 2.5-3 billion a year.