€90 Billion in EU Support: The Conditions Ukraine Must Fulfill to Unlock the Entire Package

The conditions for the first €3.2 billion tranche of European macro-financial assistance have largely been met, but securing subsequent disbursements will require considerably greater effort.

The Verkhovna Rada’s ratification of the agreement on €90 billion in macro-financial assistance under the EU’s Ukraine Support Loan does not mean that the funds will automatically begin flowing into state coffers. Quite the contrary.

The Memorandum with the European Union represents another major test of Ukraine’s ability to implement reforms and mobilize domestic resources under the exceptionally challenging conditions of wartime. Any delays, backtracking, or failure to meet agreed commitments could lead to postponed disbursements, as has already occurred under the EU’s Ukraine Facility program. Last year alone, Ukraine received approximately €3.6–3.7 billion less than anticipated because of delays in fulfilling reform commitments.

The key question now is how Ukraine can meet the requirements of the new EU Memorandum while avoiding the setbacks that have previously slowed the flow of European financial support.

Photo via Mariia Kovalchuk

“HOMEWORK” FOR SECURING MACRO-FINANCIAL ASSISTANCE

The loan funds, which Ukraine is scheduled to receive in several tranches over 2026–2027, are intended to address the budget shortfall, preserve macroeconomic stability, and strengthen the country’s defense-industrial base.

“The agreement establishes the legal framework for receiving €90 billion. Of this amount, €60 billion will be directed toward strengthening Ukraine’s defense-industrial capacity, while €30 billion will provide budget support,” Finance Minister Serhii Marchenko explained.

The first disbursements are expected to begin as early as June. Provided Ukraine meets the agreed conditions on schedule, the €90 billion loan package will be distributed evenly over two years: €45 billion this year and another €45 billion in 2027. At the average annual exchange rate, this year's allocation is equivalent to approximately UAH 2.221 trillion.

Of the funds expected in 2026, up to €28.3 billion is earmarked for arms procurement and military equipment, while €16.7 billion will be provided as macro-financial support to help sustain the state budget.

Serhii Marchenko

At the same time, funding for the budget-support component will be provided through two separate instruments: up to €8.35 billion in direct macro-financial assistance and an additional €8.35 billion through the Ukraine Facility mechanism.

Securing these funds will require Ukraine not only to continue implementing the reforms already envisaged under the Ukraine Facility framework but also to meet a new set of commitments outlined in the Memorandum with the European Union. Many of these obligations overlap with the structural benchmarks established under Ukraine’s current cooperation program with the International Monetary Fund. While this alignment may simplify implementation, it also raises the stakes. Failure to fulfill a single commitment could delay disbursements under both programs simultaneously. An even less favorable scenario is also possible, though it falls beyond the scope of this discussion.

CONDITION FOR THE FIRST TRANCHE: MAXIMIZING DOMESTIC REVENUE MOBILIZATION

The release of the first €3.2 billion tranche is tied to a series of measures aimed at strengthening domestic revenue collection and reducing Ukraine’s reliance on external financing.

One of the key requirements was the submission to parliament of legislation introducing taxation on international parcels, excluding goods for security and defense purposes. Formally, Ukraine has fulfilled this obligation. The bill was submitted to the Verkhovna Rada and even brought before the chamber for consideration. However, lawmakers ultimately failed to approve it.

While this setback is not expected to jeopardize the first tranche of EU financial assistance, it could create complications later. Failure to adopt the legislation may affect Ukraine’s ability to meet future commitments under both the EU loan program and the Ukraine Facility mechanism, while also raising concerns among other international partners, including the International Monetary Fund.

A similar situation surrounds the draft law on the taxation of income earned through digital platforms. Consideration of the bill at second reading was postponed several times in May. While this delay does not affect the first tranche, failure to adopt the legislation could become a significant obstacle to securing the second disbursement under the program.

Ukraine has been more successful in meeting several other key requirements. The government has extended the 5% military levy for an additional three years, ensuring a stable source of budget revenue during wartime. It has also fulfilled commitments related to customs reform, including the appointment of a permanent head of the State Customs Service and the preparation of a new Customs Code designed to harmonize Ukrainian customs legislation with the EU Customs Code (Regulation (EU) No. 952/2013).

European partners also expected Ukraine to adopt an updated Public Finance Management (PFM) Strategy outlining medium-term reform priorities and a comprehensive implementation roadmap. The government has completed this task as well.

In addition, the Cabinet of Ministers approved a resolution establishing procedures for the development, monitoring, and evaluation of strategic planning documents that serve as the basis for public investment proposals, along with a corresponding action plan. Together, these measures create the institutional framework needed to develop sector-specific investment strategies and integrate the Public Investment Management (PIM) reform cycle into planning for 2027–2028.

Taken together, these steps suggest that Ukraine has largely fulfilled the conditions required to unlock the first tranche of macro-financial assistance.

Taken together, these measures suggest that Ukraine is on track to secure the first tranche of macro-financial assistance worth €3.2 billion. According to sources in the European Commission, the funds are expected to be disbursed around mid-June, alongside an additional €5.9 billion designated for defense needs.

As European Commission spokesperson Balázs Ujvári noted, “several procedural and technical steps related to the loan agreement still need to be completed.” Nevertheless, there appears to be no significant risk to the timely release of the first tranche.

Photo via Magnific

THE SECOND TRANCHE: RAISING REVENUES WHILE KEEPING SPENDING IN CHECK

The requirements attached to the second tranche are more demanding and focus on strengthening public finances through a combination of tax reform, improved revenue collection, and more effective fiscal management.

Among the key commitments Ukraine must fulfill are:

submitting legislative proposals to align the country’s corporate taxation framework with Article 4 of the EU Anti-Tax Avoidance Directive (Council Directive (EU) 2016/1164);

introducing taxation of income earned through digital platforms;

adopting legislation on the taxation of international parcels, with exemptions for goods intended for security and defense purposes; and

modernizing the property valuation system.

Work on the latter has already begun. Draft law No. 13435, “On Property Valuation,” has been submitted to parliament and is being prepared for a renewed first reading. More recently, lawmakers submitted an alternative bill — No. 13435-1, “On Property Valuation, Property Rights Valuation, and Professional Valuation Activities in Ukraine” — offering a different approach to reforming the sector.

Unlike the largely procedural benchmarks attached to the first tranche, these measures require politically sensitive legislative decisions and may prove more difficult to implement within the required timeframe.

Several additional benchmarks fall within the remit of the State Tax Service, which is expected to strengthen tax compliance and improve enforcement mechanisms to increase revenue collection.

A second set of requirements concerns the sustainability and efficiency of public spending. These include advancing Public Investment Management (PIM) reforms, intensifying efforts to combat tax evasion, and adopting the Budget Declaration for 2027–2029, complete with medium-term revenue and expenditure projections. Time is a critical factor. Under Ukrainian law, the Cabinet of Ministers is required to approve and submit the Budget Declaration to parliament by June 1, leaving little room for delay.

The third pillar focuses on public finance governance. The Ministry of Finance must approve an updated Digital Development Plan for the State Customs Service through 2030, while the Verkhovna Rada is expected to appoint the three remaining independent experts to the selection commission responsible for choosing members of the Board of the Accounting Chamber.

Photo via Willfried Wende from Pixabay

Taken together, the conditions attached to the second tranche revolve around three strategic objectives: strengthening budget revenues, improving the efficiency and sustainability of public expenditures, and deepening reforms in public financial management. Failure to meet these commitments could postpone not only the next disbursement of EU macro-financial assistance but also funding under other international support programs linked to similar reform benchmarks.

CONDITIONS FOR THE THIRD TRANCHE

The requirements attached to the third tranche are even more politically sensitive.

Foremost among them is reform of Ukraine’s simplified taxation regime to prevent its use for artificial business fragmentation and tax-minimization schemes. According to government estimates, closing these loopholes could generate at least UAH 70 billion in additional annual budget revenues, making the reform one of the most fiscally significant measures in the entire program.

A second requirement is the adoption of legislation simplifying VAT administration for sole proprietors and individual entrepreneurs. The Ministry of Finance is already drafting the necessary proposals, and securing parliamentary support for measures that reduce administrative burdens and streamline reporting procedures is unlikely to prove controversial.

Reforming the simplified taxation regime, however, is a different matter. Convincing lawmakers to support changes that would limit opportunities for tax optimization through business fragmentation is expected to be considerably more difficult. Alongside the proposed removal of tax exemptions on international parcels, this reform is widely viewed as one of the most politically challenging conditions attached to the EU loan program.

Another major hurdle will be the adoption of a new Customs Code of Ukraine. Given the scope and complexity of the legislation, as well as the likelihood of hundreds of amendments during parliamentary consideration, the process could prove lengthy and contentious.

The remaining benchmarks appear less politically sensitive and more technical in nature. Nevertheless, they remain substantial undertakings and are no less important for advancing Ukraine’s fiscal reforms and broader European integration agenda.

WHERE THE MONEY WILL GO

The same day the Verkhovna Rada ratified the loan agreement with Ukraine’s European partners, lawmakers also approved in first reading amendments to the 2026 State Budget designed to incorporate the anticipated inflow of EU financial assistance.

The proposed budget revisions provide a first glimpse of how the additional resources are expected to be allocated and underscore the central role that European funding will play in supporting both Ukraine’s wartime needs and its broader macroeconomic stability.

The proposed budget amendments are designed to incorporate the expected EU funding into Ukraine’s public finances and create the legal framework for directing these resources toward defense, budgetary support, and other priorities outlined in the macro-financial assistance program.

Under the revised budget projections, state revenues in 2026 are expected to increase by UAH 2.291 trillion. The bulk of this growth will come from UAH 2.221 trillion in EU financial assistance provided under the enhanced cooperation mechanism. Additional revenues include UAH 47.7 billion linked to the implementation of the Ukraine Plan under the EU’s Ukraine Facility initiative and a further UAH 22.6 billion in personal income tax receipts generated by higher military salaries. Combined, these measures would raise total state revenues to nearly UAH 5.196 trillion.

As expected, the overwhelming majority of the additional funding will be directed to the security and defense sector. Defense-related expenditures are projected to increase by UAH 1.560 trillion, bringing total spending on national defense and security in 2026 to UAH 4.367 trillion.

The proposed allocations include:

UAH 174.3 billion for military personnel compensation and related payments;

UAH 1.371 trillion for the procurement of weapons, ammunition, and military equipment;

UAH 14.6 billion for a dedicated reserve fund supporting the security and defense sector.

These figures underscore the extent to which the EU loan programme is intended not only to stabilize Ukraine’s public finances but also to sustain the country’s defense capabilities during the war.

In addition to defense spending, the budget amendments allocate an extra UAH 40 billion to strengthen regional resilience ahead of the winter season.

According to the Ministry of Finance, the funding will support a new program focused on backup power generation, modernization of boiler facilities, and the protection of critical infrastructure. The objective is straightforward: to help ensure uninterrupted access to electricity and heating for households and communities despite ongoing wartime risks.

Another proposed allocation has generated considerably more debate. The government plans to direct UAH 40 billion to the Cabinet of Ministers’ Reserve Fund, a move that has drawn criticism from some lawmakers and policy experts. Critics argue that these resources would be better spent on immediate defense needs and contend that the allocation effectively diverts funding away from the defense sector.

The Ministry of Finance rejects this criticism, maintaining that a larger reserve fund is essential for responding quickly to unforeseen wartime contingencies. Given the unpredictability of the security situation, officials argue that the government requires a flexible financial buffer to address emergencies that cannot be anticipated during the regular budget-planning process.

For now, the debate remains unresolved. The budget amendment bill has passed only its first reading in parliament, and further discussions over the size and purpose of the Reserve Fund are likely as lawmakers prepare the legislation for final approval.

Ultimately, the proposed budget changes illustrate how closely Ukraine’s fiscal planning has become intertwined with European financial support. Securing the €90 billion loan package will not simply provide additional resources; it will also require sustained progress on a broad reform agenda, with each tranche tied to increasingly demanding commitments in taxation, public finance management, customs reform, and fiscal governance.

Vladyslav Obukh, Kyiv

Lead photo: Alexa / Pixabay