EU ties €90 billion Ukraine aid package to tax reforms, with €3.2 billion disbursement expected in June

The European Union signed a memorandum of understanding with Ukraine on May 20, 2026, establishing terms for a €90 billion aid package agreed in December 2025 through joint EU debt issuance. The deal conditions portions of the aid on unpopular tax reforms demanded by the IMF, with Ukraine's parliament required to ratify the agreement before disbursement. Ukraine faces a budget shortfall of at least €135 billion in 2026-2027 and will run out of money within months without support. The first installment exceeding €9 billion is expected in mid-June, including €3.2 billion for budgetary costs like soldiers' salaries and €5.9 billion for drone purchases, while the EU lobbies other G7 nations to help cover Ukraine's remaining funding gap.

€90 billion EU loan structure

• ▪The €90 billion EU loan to Ukraine is backed by the EU budget
• ▪Half of the €90 billion EU loan to Ukraine will be paid out in 2026, and the rest in 2027
• ▪EU leaders agreed in December 2025 to provide Ukraine a €90 billion loan to help fund Ukraine's defense against Russian troops after four years of war
• ▪EU leaders agreed to issue joint debt to finance the €90 billion loan to Ukraine in December 2025 after talks collapsed over a controversial plan to leverage frozen Russian state assets
• ▪EU commissioners will meet to sign off on the €90 billion loan to Ukraine once Kyiv and Brussels have discussed how to repay the debt with war reparations from Moscow

Ukraine budget shortfall projections

• ▪Ukraine's estimated budget shortfall of €135 billion is based on the assumption that the war will end in 2026
• ▪Ukraine faces a budget shortfall of at least €135 billion in 2026 and 2027

Memorandum of understanding conditions

• ▪A memorandum of understanding is required for setting terms tied to any macro financial assistance from the €90 billion EU loan to Ukraine
• ▪The European Commission is expected to unveil the memorandum of understanding for the €90 billion Ukraine loan on May 19, 2026
• ▪Ukraine's national assembly will need to ratify the memorandum of understanding before the first disbursements from the €90 billion EU loan are made

June drone procurement disbursement

• ▪The European Commission will wire €3.2 billion to Ukraine in June 2026 for budgetary and administrative costs, including paying soldiers' salaries
• ▪The European Commission will purchase drones worth €5.9 billion in June 2026 to shore up Ukraine's defenses
• ▪Ukraine is expected to receive more than €9 billion as its first installment from the EU in mid-June 2026
• ▪The EU is preparing to approve the terms and conditions underpinning the €90 billion loan to Ukraine as soon as May 18, 2026

Frozen Russian asset leverage

• ▪The Dutch have been canvassing support in recent weeks for reviving the debate around leveraging frozen Russian sovereign assets to prop up Ukraine
• ▪Using frozen Russian state assets to settle the €90 billion EU loan to Ukraine would cancel the debt that Kyiv owes
• ▪EU leaders have said they reserve the right to use frozen Russian state assets to settle the €90 billion loan to Ukraine if the Kremlin refuses to pay war reparations after the war ends

G7 coordination efforts

• ▪The EU, its member states and European financial institutions have provided a total of €200.6 billion to Ukraine as of May 2026
• ▪The European Commission will lobby Canada, Japan, the U.S. and the U.K. to cover the rest of Ukraine's budget shortfall when G7 finance ministers convene in Paris in the week of May 18, 2026

Perspective of International Monetary Fund

• ▪The International Monetary Fund demanded tax reforms from Ukraine as a condition for portions of the €90 billion EU aid package