Ukraine Secures $20 Billion Loan From the United States
Mykola Siutkin
You do business, we mitigate risks | Business Investment Risk Advisor | Co-founder of S&P Agency | Attorney | Co-publisher LDaily | Ironman
The Cabinet of Ministers of Ukraine has approved terms for receiving a $20 billion loan from the United States. This financing forms part of the G7 assistance package promised in June 2024, aimed at supporting Ukraine’s budget, military, and reconstruction efforts. The funds stem from the frozen assets of the Russian Federation.
Terms of the Loan
The loan, as specified in resolution No. 1388 dated December 6, 2024, will have an interest rate composed of a fixed rate of 1.3% per annum plus the current average yield on outstanding U.S. Treasury bills with a maturity of 52 weeks. The loan from the Federal Financing Bank is structured to last for 40 years.
The $20 billion loan is part of a larger commitment from the G7 countries totaling $50 billion. The mechanism for repayment includes profits generated from the frozen Russian assets.
Distribution Mechanism
Ukraine intends to channel the loan through a special funding mechanism established by the World Bank, named the Facilitation of Resources to Invest in Strengthening Ukraine Financial Intermediary Fund, which was created on October 10, 2024. Agreements related to the loan include a Certificate Purchase Agreement between Ukraine, the Federal Financing Bank, and the United States Agency for International Development (USAID), alongside a Loan Guarantee and Repayment Agreement.
The provisions state that loan servicing and repayment will come from sources other than Ukraine’s state budget, with an emphasis on revenue from Russian assets, per the Credit Cooperation Mechanism for Ukraine agreement with the EU.
Repayment Conditions and Implications
The loan features conditions that tie its repayment to the acquisition of reparations from Russia, setting a precedent in the structuring of international financial aid contingent on future events. Should Ukraine receive compensation for damages caused by Russian aggression, USAID and the Federal Financing Bank have limited rights to demand repayment from Ukraine's state budget.
The legislation introduced by the Verkhovna Rada amends the Budget Code to allow borrowing against Russian assets, introducing "contingent debt obligations" and specifying that this loan will not be recorded as Ukraine's public debt, with repayment contingent on reparations from Russia.
Background and Support
The decision by the EU and the G7 countries to provide up to €45 billion to Ukraine represents a collaborative international effort to support the country. The strategy for servicing and repaying the loans through future proceeds from frozen Russian Central Bank assets sets a framework for financial assistance in the context of geopolitical conflict.
The U.S. Secretary of State, Anthony Blinken, indicated that the initial tranches of the $50 billion loan are expected to be transferred to Ukraine in the forthcoming weeks, signaling immediate financial support for Ukraine.
Recommended by LinkedIn
The Federal Financing Bank (FFB), a U.S. government corporation established in 1973 under the supervision of the Secretary of the Treasury, plays a key role in administering this loan.