Ukraine Expects Start of 90 Billion EU Loan Next Month, Despite Hungary Veto

Ukraine to Receive First Tranche of 90 Billion EU Loan Next Month Despite Hungary’s Veto

EU Loan Disbursement to Ukraine Amid Hungary’s Veto

By Olena Harmash

Ukraine’s Expectation for EU Funding

KYIV, March 20 (Reuters) - Ukraine is still expecting the first tranche of a 90-billion euro ($103.89 billion) loan from the European Union next month, despite a failure to break Hungary's veto of the funding at a summit this week, President Volodymyr Zelenskiy said on Friday.

Hungary’s Blockade and EU Leaders’ Response

EU leaders were unable to convince Hungarian Prime Minister Viktor Orban on Thursday to lift his blockade of the loan, which is crucial for Ukraine to maintain its fight against Russia following its February 2022 invasion.

Zelenskiy said he had discussed the matter with the EU leaders and trusted they would find a solution.

"We are more optimistic. They will find ways to provide us with funding partially," Zelenskiy told reporters in the WhatsApp media chat. "We are expecting in April the first tranche of the amount we agreed for 2026."

Ukraine’s Financial Needs and EU Support

Budget Deficit and External Financing Requirements

With the war now in its fifth year, Ukraine faces a persistent budget deficit. Funding from the EU, Kyiv's main backer, is critical to Ukraine's stability and its ability to maintain its defence.

This year, Ukraine needs between $45 billion and $52 billion in external financing to cover its budget gap.

Background on the EU Loan Package

The EU agreed on the 90 billion euro loan package for Ukraine for this year and next back in December. But Orban, who maintains close ties with Russia and is facing a key election in April, has blocked its disbursement over a dispute about Russian oil supplies to Hungary via a pipeline through Ukraine.

EU’s Commitment Despite Veto

European Commission President Ursula von der Leyen said after the summit failed to lift Hungary's veto that the EU would find ways to pay out the promised loan.

But for Ukraine, the speed and timing of disbursements are important.

Current Financial Situation in Ukraine

Foreign Aid and Budget Spending

Economists say the government has sufficient financial reserves for the coming weeks. Ukraine received $5.5 billion in foreign financial aid since the start of this year, the central bank said. Officials expect another $1.2 billion from Japan in the coming weeks.

Ukraine's budget spending stood at about 547.2 billion hrvnias ($12.4 billion) in the first two months of the year and nearly 60% of that was earmarked for defence, finance ministry data showed.

($1 = 0.8663 euros)

(Reporting by Olena Harmash, Editing by Daniel Flynn and Nick Zieminski)