Ukraine urges US to follow EU’s four-year funding pledge

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Ukraine has urged its supporters to make multiyear commitments of financial aid, saying the EU’s four-year pledge worth €50bn was “a good signal” for the US and other powers to follow.

Serhiy Marchenko, Ukrainian finance minister, told the Financial Times it was a “good signal for all other G7 nations that the EU has already stepped in”. “What is your position? Where is your support?” he asked of other allies.

After a month-to-month scramble for cash last summer to keep the government afloat following Russia’s full-scale invasion, Ukraine’s finances stabilised in 2023. Kyiv is now looking for longer-term pledges to fund its recovery and reform plans.

Marchenko commended the EU package for its size and flexibility, for the fact that it was a medium-term commitment and because it provided cash as an incentive for specific reforms.

“As finance minister I understand it’s good to do reforms but it’s better to do reforms with some incentives.”

Kyiv will have to meet specific EU conditions to receive the money from Brussels. That is on top of requirements from other backers such as the IMF, which has a four-year $16bn lending programme with Ukraine, potentially adding to its compliance burden.

G7 governments have set up a “donor platform” to try to co-ordinate their aid and recovery efforts. But Marchenko said that since Ukraine’s overarching goal was accession to the EU, he hoped the EU programme would act as a reform “master plan” for all supporters.

“Sometimes our American colleagues want us to include some specific reforms in list of their priorities. We would like them to agree with Europeans first.”

Marchenko cautioned that a lot of the financial aid to Ukraine was in the form of loans — according to Brussels up to one-third of the EU’s promised €50bn will be in grants. Since that would place a burden on future generations it was essential that Ukraine was able to “influence” what the money should be used for.

“We have to be careful of that kind of support,” he said.

Asked whether he thought the EU would in future have to carry more of the financial weight of helping Ukraine and the US less, Marchenko said it was “not a proper discussion — not yet”. It was US leadership that allowed Ukraine to survive this war, he said, and natural that the US role should be on a par with the EU’s.

The minister said he would press ahead with a plan to reinstate Ukraine’s -pre-war tax regime – in line with the IMF’s demand for Kyiv to raise more revenue. But he said he wanted to retain room for “carefully crafted” fiscal incentives to encourage investment.

Like other senior Ukrainian officials, Marchenko expressed frustration that multilateral development banks were not doing more to help his country and were even competing with Kyiv to raise cash from donor governments.

Much of the $23bn disbursed by the World Bank since February last year was US grant funding. Marchenko suggested Kyiv would prefer to receive it directly from Washington.

“It is [the US’s] preferred way of doing business. We are OK with it. But it takes a lot of time to match this with our reality.”

Marchenko said his “most important battleground” was competition with multilateral development banks for resources.

“You use our problems to attract attention to increasing your capital stock. So now is the right time for you to spend money on the priorities Ukraine needs, not what you want to spend the money on.”