Belgium's refusal to support the EU's multibillion-euro loan to Ukraine may prompt the International Monetary Fund (IMF) to block financial support for Kyiv, leading to a collapse of confidence in the country's economic viability, EU officials warn.

Source: Politico

Details: European supporters of a €140 billion "reparations loan" for Ukraine, backed by frozen Russian state assets held in the EU, insist that uninterrupted IMF support is critical, and time is running out to persuade the institution to approve new loans for Kyiv.

Ukraine is facing a massive budget deficit and is in urgent need of IMF funding to continue defending against Russia's full-scale invasion. The IMF is considering an US$8 billion loan over the next three years.

However, hopes of securing IMF funding depend on whether the EU can finalise its own €140 billion loan backed by frozen Russian state assets, most of which are held in Belgium.

A European Commission representative and diplomats from three EU member states stated that reaching such an agreement would convince the IMF of Ukraine's financial sustainability over the coming years – a necessary condition for the Washington-based institution to extend its support.

But last month, Belgium opposed the loan at an EU leaders' summit, citing financial and legal risks, which reduced the chances of concluding the deal before the IMF's decisive meeting, likely to be held in December.

"We are facing a timeline issue," said an EU official, speaking anonymously, as did the other sources. He noted that the next EU leaders' summit is scheduled only for 18-19 December – so more urgent decisions are needed.

Amid a sharp decline in US aid, the IMF expects the EU to bear the main financial burden for Ukraine in the coming years.

Although the IMF programme for Ukraine is relatively small, its approval sends a signal to investors that the country is financially viable and committed to reforms. "It's a benchmark for other countries and institutions to evaluate whether Ukraine is doing proper governance," said a Ukrainian official. IMF experts are expected to visit Kyiv in November to discuss the three-year programme.

"[The IMF's support] is something that we should not play with," the EU official added.

Background:

• On 24 September, the EU said it may provide Ukraine with a "reparations loan" of up to €140 billion, but the final funding amount will be determined after the IMF assesses Ukraine's needs in 2026-2027.
• German Chancellor Friedrich Merz supports the use of frozen Russian assets for Ukraine and is urging the EU to unlock the €140 billion loan.
• Ultimately, at a meeting in Copenhagen, EU leaders failed to reach a consensus on allocating the €140 billion loan to Ukraine backed by frozen Russian assets – due to Belgium's position.

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