The UK has announced an additional £2.26bn loan to Ukraine for purchasing weapons to repel the ongoing Russian invasion. This funding is part of a broader $50bn (£38.5bn) loan program expected to be confirmed by G7 nations later this week. The loans will be repaid using interest accrued from $300bn of frozen Russian assets in the West, with the UK emphasizing that the profits will support Ukraine rather than benefit Russia in the future.
The announcement was made by Chancellor Rachel Reeves alongside Defence Secretary John Healey, who clarified that the loan is separate from the UK’s existing £3bn annual military aid commitment to Ukraine. Healey added that Kyiv is likely to use the funds for urgently needed munitions once enabling legislation is approved by Parliament.
Efforts to hand over all frozen Russian assets directly to Ukraine were hindered by opposition from the IMF, which raised concerns about potential legal and financial risks. Reeves clarified that the current approach focuses on utilizing the profits generated from these assets to ensure legal compliance.
The US is anticipated to contribute $20bn to the loan program, with other G7 members finalizing their pledges. The timing of the UK’s announcement coincides with upcoming IMF and World Bank meetings in Washington DC, ahead of the US presidential election. Reeves expressed hope that all G7 commitments would be secured by the end of the week.
With former President Donald Trump, the Republican candidate, expressing skepticism about continued US support for Ukraine, the loan program serves as a contingency to help Kyiv maintain its defense efforts. Washington has already provided $64bn in military aid since Russia’s full-scale invasion in February 2022. Some of the loan funds may be allocated to purchasing American-made weapons, especially if future US military assistance is curtailed.
Reeves declined to specify if next week’s budget, the first under the Labour government, will include a timeline for raising defense spending to 2.5% of GDP from the current 2.32%. She confirmed the commitment remains in place, with further details to be announced soon. The Chancellor aims to implement £40bn in tax hikes and spending cuts in the upcoming budget, although relations between the Treasury and Ministry of Defence remain amicable.
