Ukraine Facility

The Ukraine Facility is a pivotal instrument within the European Union's strategy to address the multifaceted challenges confronting Ukraine in the wake of Russia's war of aggression. This dedicated support mechanism, which entered into force on 1^st March 2024 and covers the years 2024 to 2027, offers up to €50 billion in stable and predictable financial support. It represents a profound commitment by the EU to

• bolster Ukraine's resilience
• foster its recovery
• facilitate its path towards sustainable development and EU membership.

The key objectives of the Ukraine Facility are to:

• Support recovery, reconstruction, and modernisation –rebuild vital infrastructure, revitalise the economy, and enhance societal resilience.
• Support reforms on the way to EU accession – by providing assistance and incentives for reforms implementation, the EU aims to facilitate Ukraine's alignment with European standards and values.
• Support financing needs – ensuring the continuity of essential services even in the face of war and economic strain.
• Mobilise investments – facilitating investment flows to catalyse rapid economic recovery and sustainable growth, laying the groundwork for long-term prosperity.
• Support Ukrainian society –mitigating the humanitarian impact of the war and promoting social cohesion and inclusivity within Ukrainian society.

Pillar I: Support to Ukraine through the Ukraine Plan

This pillar entails the provision of financial assistance to Ukraine, totalling €38.27 billion. Comprising both grants (€5.27 billion) and loans (€33 billion), this stream of support aims at addressing the financial needs of the Ukrainian State to maintain macro-financial stability while support reforms and investments aimed at the recovery, reconstruction and modernisation of Ukraine.

Funds under this Pillar of the Facility will be provided based on the successful implementation of the Ukraine Plan, with disbursements scheduled quarterly. The support is conditional upon fulfilment of requirements linked to

• essentials such as macro-financial stability, budget oversight, and public financial management,
• sectoral and structural reforms and investments (necessary for the EU accession).

As part of the process of preparation of the Plan by the Ukrainian government, social partners, civil society organisations and the Ukrainian Parliament (the Verkhovna Rada) were consulted, in accordance with the principle of multi-level governance.

The Ukraine Plan will be assessed by the Commission, which will present a proposal to the Council for adoption.

A precondition for the support to Ukraine under the Facility is that Ukraine continues to uphold and respect effective democratic mechanisms, including a multi-party parliamentary system and the rule of law, and to guarantee respect for human rights, including the rights of persons belonging to minorities.

An exceptional bridge financing for a total amount of EUR [6] billion was disbursed to Ukraine in March [and April] 2024, to support the urgent needs and ensure the macro-financial stability of the country. The payment is subject to the policy conditions agreed in a Memorandum of Understanding between the Commission and Ukraine.

Details of Pillar I:

• Subject to the adoption by the Council of the implementing decision approving the Ukraine Plan, Ukraine may request a pre-financing payment of an amount of up to 7% of the loan support provided under Pillar I.
• An amount equivalent to at least 20% of the non-repayable financial support will be allocated to the recovery, reconstruction and modernisation needs of Ukraine’s sub-national authorities, in particular local self-government.
• At least 20% of the overall amount corresponding to investments under the Ukraine Plan and to support under the Ukraine Investment Framework (see below) shall contribute, to the extent possible in a war-torn country, to climate change mitigation and adaptation, environmental protection, including biodiversity conservation, and to the green transition.

Pillar II: Ukraine Investment Framework

Pillar II consists of a 'Ukraine investment framework' designed to attract and mobilise public and private investments for Ukraine's recovery and reconstruction, in support of the Ukraine Plan's implementation. It will cover risks for operations aiming at supporting sovereign, sub-sovereign, non-commercial and commercial entities, and the private sector: loans, including local currency loans, guarantees, counter-guarantees, capital market instruments, any other form of funding or credit enhancement, insurance, and equity or quasi-equity participation.

Details of Pillar II:

• Counterparts eligible for the Ukraine Guarantee and for the purpose of financial instruments are:
  • international organisations or their agencies;
  • the European Investment Bank or the European Investment Fund;
  • public law bodies, including Member State organisations;
  • bodies governed by private law with a public service mission, including Member State organisations, to the extent that they are provided with adequate financial guarantees.       
• the EIB Group will be entrusted until 31 December 2025 with the implementation of a 25% dedicated indicative minimum amount of the Ukraine Guarantee for operations with sovereign counterparts and non-commercial sub-sovereign counterparts.
• At least 15% of the guarantees provided under the Ukraine Investment Framework will be used to support micro, small and medium-sized enterprises, including start-ups, including through financial tools which have as an objective to reduce the risk involved in the lending operations of Ukrainian banks.
• A Steering Board will provide strategic and operational guidance for the implementation of the Ukraine Investment Framework. It will comprise representatives of the Commission and of each Member State. The European Parliament and the Verkhovna Rada will have observer status.

Pillar III: Union accession assistance and related support measures

This pillar, amounting to €4.76 billion, focuses on providing technical assistance and support measures to facilitate Ukraine's alignment with EU laws and regulations. It includes:

• Capacity-building initiatives, including social partners, civil society organisations, as well as local and regional authorities.
• Assistance to Ukraine in implementing the reforms necessary for EU accession and to ensure the effective utilisation of financial assistance.
• Support for other initiatives aimed at responding to the Russian aggression against Ukraine, including to enforce international law in relation with crimes committed by Russia on the territory of Ukraine.
• Interest rate subsidies for the cost of loans provided by the Ukraine Facility or previous macro-financial assistance instrument.

• The Commission will conclude a Framework Agreement with Ukraine for the implementation of the Facility setting out specific arrangements for the management, control, supervision, monitoring, evaluation, reporting and audit of funds under the Facility.
• The Commission will establish a scoreboard for the Ukraine Plan (the ‘Scoreboard’) which will display the progress made in the implementation of the Ukraine Plan.
• Financing and loan agreements will be concluded, which will set out the responsibilities and obligations of Ukraine and the EU in the implementation of Union funds, as well as the conditions for disbursements.   
• Ukraine Facility Dialogue – the Commission will hold, at least every four months, a dialogue with the European Parliament to discuss the state of progress in the Facility implementation
• A dedicated independent Audit Board composed of independent members appointed by the Commission will assist the Commission by regularly reporting on the implementation of the funds spent to achieve the objectives of the Facility, and by issuing recommendations to Ukraine.