Loan backed by Russian assets crucial for 2025 budget, Kyiv says

A view of the city at sunrise during an air raid alert in Kyiv

(Reuters) - The Group of Seven leaders' decision to provide Kyiv with a $50 billion loan backed up by interest from frozen Russian assets allows Ukraine to plan its budget for 2025, the country's finance minister said on Friday.

Western aid has been vital for Kyiv to balance its books as it has poured money into defence since the Russia's full-scale invasion more than two years ago. The central bank has said it expects $25 billion in foreign financing for 2025.

"The decision opens 2025 for us. Because without this decision 2025 looked absolutely uncovered – not only in terms of military spending, but also social," Serhiy Marchenko said on national television.

While technical details on the mechanism are yet to be determined, the G7 leaders reached a political agreement at their summit in Italy. The EU Commission President Ursula von der Leyen said all G7 countries would contribute to the loan package.

Ukraine should be able to receive some financing under the mechanism in 2024, Marchenko said.

He added that partners had listened to Kyiv's appeals to allow the use of the money for all kinds of spending.

As of now, budgetary support from Kyiv's Western partners is only allocated to cover social expenditure. Ukraine finances its military needs from its own budget revenues.

(Reporting by Yuliia Dysa; Editing by Tomasz Janowski and Alex Richardson)