The European Commission on Wednesday proposed an 18 billion euro ($18 billion) financial assistance package to Ukraine next year to meet its budgetary needs, after failing to secure the pledged amount this year.
The commission said the concessional loans, averaging 1.5 billion euros a month, will help cover part of Ukraine's short-term funding needs next year. The International Monetary Fund and the Ukrainian government had estimated funding needs to be at 3 to 4 billion euros a month.
It said the money will help Ukraine pay wages and pensions and keep essential public services running, as well as ensure macroeconomic stability and restore critical infrastructure.
The IMF also estimated that the Ukrainian economy will shrink by 35 percent in real terms this year. Inflation is set to hit 30 percent.
The commission is putting forward legislative proposals to be approved by the European Parliament and the 27 member states to ensure the delivery of the funding.
European Union leaders are scheduled to meet for their regular summit on Dec 15 and 16 in Brussels to discuss a wide range of issues, including their support for Ukraine.
"And it needs to be decided quickly — 2023 is approaching fast and Ukraine's financing needs are urgent," European Commission Executive Vice-President Valdis Dombrovskis said.
"So we will be working to secure approval from the European Parliament and Council before the end of the year and we are aiming for the first disbursement in January."
The commission said the assistance will be accompanied by reforms in Ukraine to improve the rule of law, good governance, anti-fraud and anti-corruption measures to pave the way for Ukraine to join the EU.
EU member states agreed to grant Ukraine candidate status in June. But the process to become a formal member is likely to take at least years or even decades.
The proposed loans will be borrowed by the EU on capital markets. They will be repaid by Ukraine in 35 years starting from 2033, with interest rate costs to be covered by the EU.
Some EU member states have voiced their reservations about the EU taking on responsibility for Ukraine's growing debt.
Hungarian Foreign Minister Peter Szijjarto said early this week that although Budapest intends to continue providing financial support on a bilateral basis, it opposes allowing the EU to take out credit to help Ukraine.
Bloomberg News, quoting informed sources, reported on Wednesday that Hungary told EU finance ministers at a meeting in Brussels that it will not support the current proposal for the 18 billion euro package.
The EU has delivered 4.2 billion euros in macro-financial assistance to Ukraine so far this year, and plans to provide another 2.5 billion euros by the end of this month. However, there is still a gap in how the EU could honor the entire 9 billion euros to Ukraine as announced by the European Commission in May.
Ukrainian President Volodymyr Zelensky expressed his appreciation for the new proposal. "This shows true solidarity of the EU," he said in a tweet on Wednesday.
The United States has also pledged to deliver $1.5 billion a month in financial assistance to Ukraine. But Kevin McCarthy, minority leader of the House of Representatives, expressed recently that US assistance to Ukraine will not be a "blank check".