Ukraine to receive record-breaking financial aid package from EU and partners for recovery, energy, air defense, and agriculture. Prime Minister Denys Shmyhal has announced multi-billion euro agreements reached during the Ukrine Recovery Conference in Rome.

Among them is the creation of a new European Flagship Fund worth €500 million, set to launch in 2026 with a focus on energy and infrastructure investment.

In addition, under the Ukraine Facility, agreements have been signed for:

• €1.8 billion in loan guarantees,
• €580 million in grants,
• and blended financing mechanisms.

Meanwhile, European Commission President Ursula von der Leyen, commenting on the deal, stated that the EU aims to unlock up to €10 billion in investments to “rebuild destroyed homes, reopen hospitals, support businesses, and ensure energy security.”

Switzerland has committed €5 billion for economic recovery efforts.

The European Investment Bank is providing Ukraine with:

• €134 million for transport infrastructure,
• and a €200 million loan to Ukrhydroenergo (with the first €120 million tranche) to help restore hydropower plants.

Separately, the UK is offering a $2.3 billion loan for Ukraine’s air defense needs. The funds will be used to procure weapons and defense materials from the UK. The loan has a 19-year term with a 6-year grace period.

Ukrainian farmers will also receive €50 million in grant aid.

Shmyhal added, “We’ve reached an agreement with the Council of Europe Development Bank to fund €100 million in housing certificates under the eRecovery program, and an additional €200 million loan to support internally displaced persons.”

The European Commission is urgently discussing with EU and G7 countries how to prevent a major financial shortfall in Ukraine in 2025, the Financial Times reports. The projected gap in external funding could reach $19 billion, amid declining US support and no immediate prospects for a peace deal with Russia.

Among the solutions under consideration:

• allocating off-budget defense grants to Ukraine,
• providing loans under the G7’s $50 billion scheme,
• continued use of profits from frozen Russian assets,
• reinvesting those assets into higher-risk instruments with shared responsibility.

The European Commission admits that some Ukrainian support spending has already been adjusted, given the prolonged nature of the war. Diplomats emphasize that funding Ukraine’s defense should be seen as part of the EU’s own security investment.

“Clearly the military support for Ukraine that member states are giving are not only funds for the defense of Ukraine but for the defense of Europe, and some of that of course will count as defense spending,” says one senior EU diplomat.

One proposal submitted by Ukraine to the G7 suggests that bilateral defense grants could count toward NATO defense spending commitments. This would allow allies to simultaneously support Ukraine and move closer to meeting the 2% or even 5% GDP targets.

Despite more optimistic assessments from the IMF, the fund acknowledges that the deficit could grow if the war continues beyond 2025. In 2026 alone, Ukraine may require at least another $8 billion, even considering deferred tranches from the EU, US, and Japan.

The urgency is intensifying ahead of the Ukraine Recovery Summit in Rome this week, where Ursula von der Leyen will participate. Meanwhile, the European Commission is preparing to unveil new financial initiatives to support Kyiv before winter sets in.