Ukraine is receiving $54 billion from the EU. How is the money going to be used?

Ukraine is receiving $54 billion from the EU. How is the money going to be used?

Due to wartime devastation and Moscow's control (the country had taken over the key heavy industrial hubs in the east), Ukraine lost one third of its economic production.

Although there was some improvement in the economy last year, Kiev still uses almost all of its tax money on the war.

After weeks of threats from Hungary to reject the proposal, EU leaders finally reached an agreement on Thursday to provide Ukraine 50 billion euros (US$54 million) to support its war-torn economy. had supplied. The assistance package, which will be paid over a four-year period and consists of around two-thirds loans and one-third grants, is not meant to be used to pay for weapons or ammunition, which are covered by a different EU program.

Rather, it aims to finance rehabilitation, stabilize Ukraine's economy after almost two years of conflict, and get the nation ready to join the EU in the future. With the support of the package, Kiev will be able to cover the budget deficit without experiencing the severe inflation that followed Russia's full-scale invasion in February 2022. Moscow's control of the key heavy industrial hubs in the east and the war's damage caused Ukraine to lose one-third of its economic production.

Inflation reached a peak of 26% as a result of the central bank having to manufacture money to pay for governmental expenditures. Although there was some improvement in the economy last year, Kiev still uses almost all of its tax money on the war. The Ukrainian Finance Ministry and President Volodymyr Zelensky's office have not yet released information on the money' intended use as of Saturday. Nonetheless, remarks made by diplomats, lawmakers, and EU representatives from Ukraine have highlighted the following main areas of concern:

1. State salary and pension payments: This refers to remuneration for public sector workers such as teachers, physicians, nurses, and government officers.

2. Maintaining uninterrupted supply of water and electricity as well as other public services: The Ukrainian government has attempted to shield citizens from disturbances, like as the widespread violence that occurred last winter, in order to preserve domestic support for the war. However, there was also extensive combat as a result of Russian air strikes. Outages of electricity.

3. Support the currency: On Thursday, former diplomat and politician Bohdan Yeremenko told Ukrainian media that he anticipated the administration will spend a portion of the cash to relieve pressure on the hryvnia, stressing the need of this for macroeconomic stability. is crucial for.

   4. A safety net for international investment in Ukraine: On Friday, Yevgenia Kravchuk, a deputy from Zelensky's Servant of the People party, told Deutsche Welle, a German broadcaster, that Kiev will utilize a portion of the assistance to provide reliable financing and insurance for foreign investment. This covers factories that make weapons and ammo.

Zelensky posted on X, the old Twitter, to express his gratitude for the help. According to him, sustained financial support from the EU would bolster Ukraine's long-term economic stability, which is just as crucial as military assistance and applying pressure on Russia via sanctions. Though prices for Russian natural gas and oil have been capped, and the country has diversified further toward other energy sources in the West, Russia's economy has fared better than anticipated in the face of extraordinary economic sanctions imposed by Kiev's Western support.

Moscow approved the biggest federal budget in its history at the end of November, with military expenditure surpassing social spending for the first time in Russian history. To now, the Kremlin has found it easier to cope with the domestic fallout from putting the economy on a war footing thanks to record low unemployment, strong incomes, and focused social expenditure. Some experts, however, believe that its expenditure plans are not long-term viable and anticipate tax rises after the March presidential election.