EU passes €50bn support for Ukraine in new budget, but US only has six months of funding left

EU passes €50bn support for Ukraine in new budget, but US only has six months of funding left
President Joe Bidden (left) pictured with Nato Secretary-General Jens Stoltenberg. / bne IntelliNews
By bne IntelliNews October 4, 2023

The European Union has voted through a new multi-year budget for 2021-2027 that locks in €50bn of funds for Ukraine, but in the US, where a spending bill excluded Ukraine, the Pentagon only has $5bn left in its budget for Ukraine and could run out of support money in six months.

The European Parliament gave the thumbs up to amendments to the EU budget earmarking €50bn for Ukraine on October 3. The parliament expressed its support for the European Commission's proposals to revise the EU multi-year budget for the next six years that includes the creation of a special Ukrainian fund.

The resolution specifically highlights the European Commission's proposal for a comprehensive solution to address Ukraine's financial needs in the medium term and provide Kyiv with some predictability.

In response to the European Parliament's decision, Ukrainian Prime Minister Denys Shmyhal announced that the Ukrainian government anticipates receiving €18bn in aid from the EU in 2024, which will cover about half of the expected $38bn budget deficit in 20224.

Kyiv has just released Ukraine’s 2024 budget where half of state spending is funded by donations and loans from Ukraine’s international partners. It hikes military spending to 20% of GDP, but the budget specifically highlights that the main danger to implementation is the growing uncertainty over the amount of international support Ukraine will receive going forward.

In recent months growing Ukraine fatigue has become palpable and the US decision to remove a $300mn allocation for Ukraine from a government spending bill that went through at the weekend has effectively put US financial aid to Ukraine on hold, although money already allocated for spending is still available. The Wall Street Journal reports that the Pentagon still has just over $5bn in its budget for Ukraine from previous allocations, which should be enough to cover another six months' worth of support.

The situation concerning funding from the United States has become a lot more uncertain in the last few days. President Joe Biden had called on now former House Speaker Kevin McCarthy to expedite funding for Ukraine shortly after Congress approved a spending bill at the weekend to avert a US government shutdown that did not include $300mn that had been earmarked for Ukraine.

The situation became more complicated after McCarthy was ousted as House speaker on October 3 and the US government faces a fresh budget crisis and possible government shut down in 45 days from the approval of the weekend’s spending bill.

The omission of the new allocation for Ukraine leaves the Pentagon with $5.2bn in its coffers for military aid to Ukraine, enough for six months, according to a report in the Wall Street Journal, if the current pace of support is maintained.

The $5.2bn represents approximately 12% of the total $43.9bn in security assistance that the United States has provided since the Russian invasion of Ukraine in 2022. A significant portion of this aid was sourced from the Ukraine Security Assistance Initiative (USAI), which has now been exhausted.

Notably, the $5.2bn figure emerged after Pentagon officials identified an accounting error. The US Department of Defence subsequently informed both the House of Representatives and the Senate that it is running low on funding for replacing weapons previously supplied to Ukraine. Out of the previously allocated $25.9bn, only $1.6bn remains available.

As the EU commits significant financial support and the US grapples with funding limitations, Ukraine continues to face ongoing challenges in securing the resources needed for its military operations.