The Government raises $3 billion through the ERA mechanism: how Ukraine will receive funds from the proceeds of Russian assets
30 May 2025 18:57
on May 30, during a meeting of the Cabinet of Ministers, Prime Minister of Ukraine Denys Shmyhal announced that the government had decided to attract funding from Japan under the international ERA (Extraordinary Revenue Acceleration) mechanism. It is about almost USD 3 billion, which will be used to support key sectors of the economy, as well as to finance the social needs of the state, "Komersant Ukrainian" reports citing the Government portal.
According to Shmyhal, these funds are secured by the proceeds of frozen Russian assets and will become an important tool to cover priority state budget expenditures. As part of the implementation of this mechanism, Ukraine will receive assistance on transparent and controlled terms agreed with international partners.
This is almost $3 billion secured by the proceeds of Russian frozen assets to finance priority budget expenditures,” the Prime Minister emphasized.
In addition, Shmyhal informed that the Government of Ukraine and the International Monetary Fund (IMF) have reached an agreement at the staff level on the eighth review of the Extended Fund Facility (EFF) program. The next step is for the IMF Executive Board to make a decision. In case of a positive outcome, Ukraine will receive a new tranche of about USD 500 million.
The Head of Government emphasized that despite the full-scale war and significant economic difficulties, Ukraine demonstrates the ability to maintain macro-financial stability. Attracting external financing remains critical for the maintenance of vital state functions, from supporting the army to social payments.
What is the ERA (Extraordinary Revenue Acceleration) mechanism?
ERA (Extraordinary Revenue Acceleration) is an innovative international financial instrument launched by the Group of Seven (G7) countries with the support of international institutions, including the World Bank and the European Commission, to provide rapid financial support to Ukraine at the expense of proceeds from frozen Russian assets.
How the ERA mechanism works
1. The G7 countries that hold frozen Russian state assets (mostly in the form of securities owned by the Central Bank of the Russian Federation) invest these funds.
2. The income (interest) received from the investments is directed to a special fund to help Ukraine.
3. At the decision of donors, these revenues are converted into loans or grants that are provided to Ukraine to finance
- the budget
- restoration of critical infrastructure;
- the social sphere (healthcare, education, social protection);
- defense capability (not in the military sense, but to support the functioning of the state in times of war).
What is the IMF’s Extended Fund Facility (EFF) Program?
The EFF (Extended Fund Facility) is a medium-term program from the International Monetary Fund, which is provided to countries with deep structural problems in their economies. It provides not just loans, but comprehensive structural reforms in exchange for support.
Key parameters of the EFF for Ukraine (2023-2027):
- Total program volume: ~$15.6 billion.
- Duration: 4 years.
- Objective: to maintain macro-financial stability, gradually reduce the budget deficit, and reform public administration and public finances.
- Structure: tranches are disbursed in stages after fulfillment of obligations (so-called “beacons” – structural and fiscal conditions).
After the eighth review of the program, the next tranche of about $500 million is expected to be disbursed to stabilize Ukraine’s state budget.
Why it is important
The funds will help Ukraine prevent a financial crisis in times of war. In addition, this is a precedent-setting decision: using the proceeds from the frozen assets of the aggressor country to restore the state affected by the aggression.
The IMF program is the key to the trust of other donors and private investors, as it confirms that the country fulfills its obligations and is able to reform even in extraordinary circumstances.
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