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European Commission proposes new $1.35 billion loan to Ukraine amid invasion threat

by Max Hunder January 24, 2022 4:51 PM 2 min read
European Commission President Ursula von der Leyen announced a proposed new $1.35 milllion loan for Ukraine at a press conference in Brussels on Jan. 24, 2022. (European Commission press service)
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European Commission President Ursula von der Leyen announced a new proposed financial assistance package of 1.2 billion euros ($1.35 billion) to Ukraine on Jan. 24.

“This package will help Ukraine now to address its financing needs due to the conflict,” von der Leyen told reporters in Brussels.

The commission’s proposal must now be approved by the European Council and the European Parliament. Von der Leyen encouraged both to do so “as soon as possible” to hasten the delivery of funds.

The announcement came amid the growing threat of a further invasion by Russia, which has massed over 122,000 troops on Ukraine’s borders and has engaged in threatening rhetoric.

According to von der Leyen, the first emergency loan tranche of $677 million (600 million euros) will be disbursed immediately after the package is approved.

The package is similar to the $1.35 billion two-tranche loan given to Ukraine by the EU to combat the Covid-19 pandemic in December 2020 and October 2021.

“Moreover, we will soon start work on a second, larger macro financial assistance program to support the country’s modernization efforts,” said von der Leyen.

The сommission president also announced the allocation of $135 million (120 million euros) in EU grants to Ukraine for 2022, almost double the figure for 2021.

Similar EU grants have recently been given to improve Ukraine’s nuclear safety, support regional decentralization, and fund cultural development.

“This will strengthen Ukraine’s statebuilding and resilience efforts,” she said.

Von der Leyen also mentioned the EU’s investment plan for Ukraine, which she said aims to attract $6.8 billion (6 billion euros) of private investment to Ukraine.

Ukraine’s foreign investment prospects are currently bleak, as investors are scared off by the Russian military build-up on Ukraine's borders and threats to invade.

As a result, Ukrainian government bonds have taken a hammering in recent weeks, and the hryvnia has dropped to its lowest level against the U.S. dollar in a year. Russia’s currency and assets have also suffered, with the country’s main stock index down 15% over the course of 2022.

The current economic instability will likely make Ukraine more dependent on financial assistance from international institutions such as the EU, which has given Ukraine over $19 billion in loans and grants since 2014.

Von der Leyen concluded her statement by expressing diplomatic support to Ukraine.

“Ukraine is a free and sovereign country. It makes its own choices, and the European Union stands by the side of Ukraine,” she said.

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