The European Union’s green light for a 90-billion-euro loan offers Kyiv a vital fiscal lifeline, preventing the deep reductions to state services that economists said would have been necessary if financing had lapsed. Still, researchers and government figures caution that the loan is unlikely to meet all of Ukraine’s military and energy-sector needs this year.
Ukraine’s draft budget projects a wide deficit of roughly 1.9 trillion hryvnias in 2026 - about $43 billion or near one fifth of gross domestic product - but specialists contend that this projection does not fully account for the ongoing costs of war with Russia.
Maksym Samoiliuk, an economist at the Centre for Economic Strategy in Kyiv, said the approval of the delayed EU credit allows defence spending to be recalculated more realistically, including a planned pay increase for military personnel expected in the summer. "The loan is crucial as it creates the space needed to address pressures in Ukraine’s defence budget," Samoiliuk said.
Only half of the 90-billion-euro facility will be disbursed to Ukraine this year, with the remaining tranche scheduled for 2027. A substantial portion of the loan is allocated to military needs, while roughly 17 billion euros each year are designated for general budget uses such as health and education.
Beyond Kyiv’s own defence outlays, a coalition of more than 20 allies finances purchases of U.S.-made weaponry through the PURL programme. That programme and allied contributions are a separate supplemental source of armaments funding.
The loan’s approval was stalled for months while Hungary’s Prime Minister Viktor Orban blocked the measure, citing Kyiv’s perceived delay in repairing an oil pipeline that had been damaged by what Ukrainian officials described as a Russian drone attack. The pipeline carries Russian oil to Hungary and Slovakia. The resumption of oil flows on Wednesday - following Orban’s electoral defeat on April 12 - cleared the administrative path for EU ambassadors to approve the loan.
Yuliya Markuts, Vice President for Macro and Public Finance at the Kyiv School of Economics Institute, said the defence budget will likely be revised upward by as much as 10 billion euros depending on how frontline developments unfold. She noted that Ukraine already raised its military spending projections last year, partly funded through government bond issues and the G7-backed Extraordinary Revenue Acceleration (ERA) loans. "How will it be this year? It’s hard to say now, but there could be some kind of repeating this," Markuts said, adding that it is possible the EU loan might cover the revised budget.
Economists had warned that Ukraine might exhaust its available funds by June if the EU loan was not disbursed by then, which would have forced deep cuts in public services. The approval by EU ambassadors brought visible relief for many Ukrainians who rely on state institutions for education, social services and other public goods.
Hanna Fedotova, a 58-year-old nursery caregiver in a basement facility in the southeastern city of Zaporizhzhia, around 40 km from the frontline, expressed the sentiment on the ground. She said the EU funding provided stability to state institutions and, importantly, to education and development. "This aid is about having confidence in tomorrow, the certainty that we will be able to keep doing our jobs," Fedotova said.
The mechanics of the EU credit come with a specific repayment clause: Ukraine would only be required to repay the loan if Russia makes war reparations to Kyiv. Despite this provision, President Volodymyr Zelenskiy has underlined that the 90-billion-euro loan does not cover all of Ukraine’s financing needs for the conflict.
"We talk about 90 billion and say that this amount covers everything. That’s false," Zelenskiy told Reuters in an interview, saying the loan allows Ukraine to order only 60% of the weapons its domestic defence industry has the capacity to produce. He also highlighted additional specific financing needs: finding 5 billion euros to shore up the electricity sector after attacks, and securing $15 billion for weapons under the PURL arrangement despite allies spending nearly $5 billion last year, mostly on air-defence equipment.
"We can’t protect everything, even though we must do so. So where to take the money from?" Zelenskiy said, adding he hoped that defence cooperation agreements with Gulf states might supply further funds.
The European Commission has acknowledged that the two-year loan covers roughly two-thirds of Ukraine’s external financing requirements. EU Economy Commissioner Valdis Dombrovskis said that for 2027 international partners still need to commit the remaining financing, while funding needs for the current year would be secured.
Ukraine has other financing avenues in play. Prime Minister Yulia Svyrydenko indicated the country would soon receive 2.7 billion euros from the EU’s Ukraine Facility after parliament approved overdue reforms. In February, Kyiv also agreed a four-year, $8.1 billion International Monetary Fund loan. These funds come with conditionalities linked to governance and tax measures; some are politically contentious.
For example, the IMF consented last week to delay the imposition of value-added tax on entrepreneurs after parliament resisted the measure. Samoiliuk warned that the most urgent issue ahead will be Ukraine’s ability to maintain reform momentum. "Ukraine’s capacity to sustain the momentum of reforms will be the most pressing issue going forward," he said. "Ukraine’s international partners should apply more pressure... and emphasise that Ukraine itself needs these reforms."
While the EU loan prevents immediate fiscal contraction and preserves funding for critical public services, analysts and officials agree that further financing and sustained reform commitments will be necessary if Kyiv is to meet both public-sector needs and an unpredictable war-related spending trajectory.