Budgetary financing for macroeconomic stabilization

Geopolitical tensions with Russia had already severely restricted Ukraine’s access to international capital markets when Russia’s full-scale invasion on February 24, 2022, further disrupted the country’s macro-financial stability. Ukraine faced a deep recession in 2022 and massive reconstruction needs amid a humanitarian, fiscal, and balance of payments crisis. Focused on maintaining essential social services, financial stability, and defending against Russian forces, the Ukrainian authorities called on the international community for urgent financial support to sustain priority expenditures.

On February 25, 2022, the French President announced that France would provide budgetary assistance. The CICID co-secretariat authorized AFD to act under a special mandate, enabling a first emergency financing in March 2022 and a second in October 2022.

The macroeconomic stabilization budget support (FB-CM) provided by AFD, at the request of the Ukrainian state, complements multilateral and bilateral assistance already mobilized to address urgent budgetary and external financing gaps. Its primary aim is to help the Ukrainian government maintain essential public services (such as salaries for teachers and healthcare workers, social safety nets, food supply, and medical provisions) and to mitigate the economic and social impacts of the conflict.

AFD’s support consists of two sovereign loans of €300 million and €100 million, granted to Ukraine using French state resources. This intervention is carried out at the request of, on behalf of, and at the risk of the French government.

These sovereign loan financings will be granted to Ukraine, represented by its Ministry of Finance, which will sign the financing agreement. The funds will be allocated by the Ukrainian government to cover public expenditures, excluding those on AFD’s exclusion list and, more broadly, any military spending.

These budgetary financings will enable the Ukrainian authorities to cover essential non-military expenditures amid severe constraints on public spending. They will also help stabilize the country’s external balances, which have been under intense pressure since the start of the conflict.