EU seeks ways to cover Ukraine's budget deficit up to $19 billion next year - FT
Kyiv • UNN
The European Commission is considering options to finance Ukraine's budget deficit for next year, which could reach $19 billion. Off-budget grants, advance loans, and the use of Russian assets are being discussed.
Brussels is urgently exploring ways to cover Ukraine's budget deficit of up to $19 billion next year, the Financial Times reports, writes UNN.
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"The European Commission is discussing options with EU member states, including directing military support to Ukraine in the form of off-budget grants, upfront loans from the existing $50 billion G7 support scheme for Kyiv, and further use of Russian state assets immobilized in the EU," according to several people familiar with the discussions.
Ukraine's projected budget deficit next year is not yet covered by external financing, the publication writes.
"There is growing concern about next year, and many stakeholders who were counting on a ceasefire agreement this year [to ease Ukraine's financial situation] are forced to recalculate their expenses and realize that there is a [financial] hole, no matter how hard they try to cut it," said a senior EU official involved in negotiations with Kyiv.
The European Commission has already had to adjust spending from Ukraine-related funding streams throughout 2025, officials told the Financial Times.
The urgency in Brussels to find new funding is linked to the upcoming summit in Rome, dedicated to financing Ukraine's reconstruction needs, which will be attended by European Commission President Ursula von der Leyen.
The IMF estimates that Ukraine's financing needs for next year are covered, but this is on the condition that this year's war ends or in mid-2026 - a scenario that Ukraine and the EU do not share, the publication writes. IMF Managing Director Kristalina Georgieva said last month that the Fund "will assess whether this financing gap will increase and whether it will require additional external assistance financing."
The goal is to ensure Ukraine's needs are met well before winter, especially given the uncertain prospects for further US military support, one EU diplomat said.
One proposal, which Ukraine has shared with G7 countries and which is under consideration by the European Commission, is to direct military support to Ukraine as bilateral grants, which would be accounted for separately as an "off-budget external transfer," and at the same time counted towards national defense spending targets, the publication notes.
This would serve a dual purpose - contributing to NATO's commitments to increase national defense spending to 5 percent of GDP, while simultaneously providing support to Ukraine. "Instead of duplicating capabilities, European allies could co-finance the Ukrainian armed forces, viewing this as a service Ukraine provides to enhance continental security," Ukraine reportedly wrote in a document circulated among G7 allies and seen by the Financial Times.
The European Commission was due to discuss this and other options with EU finance ministers on Monday evening, two people familiar with the matter said.
"Obviously, the military support to Ukraine provided by member states is not only funds for Ukraine's defense, but also for Europe's defense, and part of this, of course, will be considered defense spending," said one senior EU diplomat.
Another option is to await payments from the existing $50 billion G7 instrument, which provides Ukraine with loans based on profits from Russian state assets immobilized in the West.
Without a ceasefire to stimulate Ukraine's domestic economy, Kyiv expects a deficit of at least $8 billion in 2026, even if some of the promised amounts can be provided by partners, including the EU, Japan, and the US. If this does not happen, the financing gap could reach $19 billion
Another option, reportedly, could be to get more from Russian immobilized assets by reinvesting them in more risky asset classes - with a method being developed to share responsibility for potentially larger financial losses that would not make Belgium, where most of the assets are held, solely responsible for them.
"We are exploring these options, including the possibility of further use of immobilized Russian assets," EU Economy Commissioner Valdis Dombrovskis said last month.