Britain has pledged to lend Ukraine an additional £2.26bn to help them defend against the Russian invasion. This loan is part of a larger $50bn loan program expected to be confirmed by G7 members soon. The money will be used by Kyiv to purchase weapons and will be repaid using interest generated by frozen Russian assets in the west.
Rachel Reeves, the chancellor, stated that the profits from the frozen assets will no longer benefit Russia but will be used to fund Ukraine. The UK has already committed to providing £3bn a year in military aid to Ukraine, and this loan will be in addition to that. The UK loan is expected to be used for purchasing much-needed munitions, according to Defence Secretary John Healey.
Efforts to give the entire amount of frozen Russian assets to Ukraine faced opposition from the IMF due to concerns about undermining financial system confidence and potential legal challenges from Moscow. Reeves clarified that they are not confiscating the assets but using the profits to fund the loan within legal frameworks.
The US is expected to contribute $20bn to the loan program, with other G7 members confirming their commitments. Reeves mentioned that the UK’s announcement was made before the IMF and World Bank annual meetings in Washington DC and the US presidential election to ensure all pieces fall into place by the end of the week.
There have been concerns about future funding for Ukraine, especially given Donald Trump’s scepticism about continuing support. Washington has been the largest donor to Kyiv, providing $64bn in military aid since the Russian invasion in February 2022. Some of the loan money may be used to purchase US-made weapons if needed.
Reeves did not discuss whether the upcoming budget would outline a timetable for increasing defense spending to 2.5% of GDP from the current 2.32%. She mentioned that the commitment stands, and details will be provided soon. The chancellor is planning £40bn worth of tax rises and spending cuts in the budget.
Despite the budget plans, the relationship between the Treasury and Ministry of Defence remains positive, with Healey supporting the efforts. The ministers have not raised concerns about the level of cuts sought by the MoD.
In conclusion, the UK’s loan to Ukraine is a significant step in supporting their defense against Russia. The use of profits from frozen assets ensures that the loan is sustainable and within legal boundaries. The commitment from the UK and other G7 members is crucial for Ukraine’s ability to fight the war. Additional details about defense spending and budget plans will be revealed soon.
