Ukrainian officials breathed a sigh of relief on Friday after European leaders agreed to keep their country funded with a $105 billion loan, which will cover a large portion of Kyiv’s financial needs over the next two years and help sustain its war effort against Russia.
“Ukraine has received a financial security guarantee for the coming years,” President Volodymyr Zelensky of Ukraine wrote in a social media post on Friday morning. A day earlier, as tense negotiations over the loan unfolded in Brussels, he had warned that without the money Ukraine would be forced to sharply scale back domestic drone production, undermining its ability to counter Russian assaults.
Some Ukrainian lawmakers lamented Europe’s failure to agree on its first choiceof using Russian frozen assets as backing for the loan — an option Kyiv had pushed for months, arguing that Moscow should pay for the destruction it caused. With several European leaders opposing the move, the European Union instead decided to use its budget as collateral.
But for Ukraine, receiving the money matters more than its source. Kyiv faced an imminent budget crunch and deep uncertainty over how long it could sustain its war effort. The interest-free loan, which will cover roughly two-thirds of the country’s financial needs for the next two years, largely resolves both issues.
It also bolsters Ukraine’s position in ongoing peace talks, weakening Moscow’s argument that Kyiv is running out of resources and should settle for a deal now. Mr. Zelensky said Ukrainian negotiators will be in the United States on Friday and Saturday to continue negotiations.
“It significantly strengthens our negotiating position, sending a signal to Putin, who was convinced that Ukraine would be left alone and that he would be able to squeeze it to the end,” said Viktor Taran, a Ukrainian political scientist and a major in the Ukrainian armed forces.
It was not immediately clear when Ukraine would begin receiving the European money, but the country needs it soon to cover the budget gap, which will open in the spring.
Ukraine’s budget for next year projects a $42 billion deficit. About half of that deficit is already covered by committed financial aid from the International Monetary Fund, the World Bank, the European Union and other Western countries. The remaining half, however, had yet to be secured before Europe approved the new loan.
Ukraine also has extra military needs that are not included in the budget. While the official budget projects $66 billion in military expenses next year, the Kyiv School of Economics Institute, a Ukrainian economic think tank, said Ukraine will likely require $100 billion for its defense. The Ukrainian defense ministry said the country would need at least $120 billion.
Without the loan, Ukraine would have been forced to delay payments starting in the spring and cut spending in the second half of next year, according to Nataliia Shapoval, head of the Kyiv School of Economics Institute. She estimated Kyiv would have had to slash 25 to 30 percent of its projected expenditures.
Spending cuts would hit the military, as emphasized by Mr. Zelensky, but also nonmilitary expenses such as pensions and salaries of civil servants, which are entirely covered by foreign aid. Ukraine devotes all its state revenues to financing defense.
Ukraine has felt the impact of stalled or delayed financial aid in the past.
Last year, as Congress held up a $60 billion financial and military aid package for months, the country was forced to divert funds earmarked for troop salaries to purchase weapons and ammunition. The uncertainty over whether it would receive the money needed to buy weapons also disrupted Ukraine’s war planning, Ukrainian officials said.
Ultimately, Ukraine had to sharply raise taxes to support the army, adding financial pressure on a population already impoverished by the war.
With the new European loan, “it seems that a catastrophe has been avoided,” said Danylo Hetmantsev, a lawmaker from Mr. Zelensky’s party and the head of parliament’s committee on finance, tax and customs policy.
The $105 billion loan will not cover all of Ukraine’s financial needs for the next two years, which the European Union estimates at $135.7 billion for both military and nonmilitary spending. But by securing a large portion of Ukraine’s budget needs, the loan is expected to help unlock additional aid from other institutions like the I.M.F., which is currently considering an extra $8 billion in lending to Ukraine through 2026-2029.
Under President Trump, the United States has mostly stopped financing for Ukraine, leaving Europe and other Western countries like Canada and Japan to support the country. Mr. Trump signed a sweeping U.S. defense bill Thursday that allocates $800 million for Ukraine over the next two years — a drop in the bucket compared with the multibillion aid the country needs.
Nataliia Novosolova contributed reporting.
Constant Méheut reports on the war in Ukraine, including battlefield developments, attacks on civilian centers and how the war is affecting its people.
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