EU Shuts Door to Early Loan Payout for Kyiv and Demands Reform

The European Union has rejected for now Ukraine’s entreaties to speed up loan payouts to cover an unexpected shortfall in military financing for this year, according to people familiar with the matter.

The decision follows Kyiv’s unexpected admission over the summer that it faces an additional funding gap of €27 billion ($30.4 billion) due to mounting costs of war.

Ukraine asked Brussels to bring forward the disbursement of its €90 billion loan, which was supposed to tide the country over through the end of 2027.

The EU has emerged as Kyiv’s biggest donor since President Donald Trump returned to the White House last year, giving the bloc a key role in sustaining Ukraine as it heads into the fifth winter of Russia’s full-scale invasion.

At a tense meeting with Ukrainian President Volodymyr Zelenskyy in New York last month, European Commission President Ursula von der Leyen said the EU still had €37 billion in budgetary support available for 2026. But she tied it to Kyiv progressing on key reforms to curb the shadow economy, bolster tax revenue and move closer to EU law, currently stuck in the parliament.

“We have identified the means to cover Ukraine’s budget and defense needs for 2026,” the European Commission and Ukraine said in a joint statement on Thursday. “We have also reconfirmed the steps needed to ensure their timely release,” they said, suggesting the EU has remained firm in insisting on reform progress.

The European Commission, the EU’s executive arm, declined any further comment.

The EU pushed back against some of the Ukrainian figures and said that front-loading loan payments now would only create a new problem for 2027, the people said, speaking on condition of anonymity because the talks are private.

They also suggested that other partners, including Canada, Norway and Japan, should provide additional funding. The EU loan was only supposed to cover two thirds of Ukraine’s needs with partners taking on the rest.

According to the statement, the €45 billion from the loan earmarked for 2027 would be allocated “swiftly” but not before the start of next year, while work will begin on “identifying additional budgetary and defense needs.”

Separately, Zelenskyy said in a post on X social media platform on Thursday that Ukraine and its partners will now “coordinate this work and align our actions every month, ensuring continuous coordination.”

The International Monetary Fund estimated this week that Kyiv will face a financing gap of $30 billion to $35 billion next year, $17 billion in 2028 and $2 billion in 2029, according to people familiar with the matter. The figures are subject to change.

IMF spokeswoman Julie Kozack said on Thursday that the Washington-based lender was in close discussions with Ukraine and international partners about the potential size of the financing gap.

The IMF is working with Kyiv to combine the second and third reviews of its $8.1 billion financing program and bring them to the executive board by December, she said. The plan was “subject to securing sufficient and credible financing assurances” to close the financing gap, according to Kozack.