Biden moves to cancel Billions in Ukrainian debt

In a controversial move, outgoing US President Joe Biden has proposed cancelling $4.7 billion in taxpayer-funded loans to Ukraine.

This decision, unveiled on November 20 by the State Department, forms part of a broader strategy to provide robust support to Kiev as the Biden administration approaches its conclusion.

The announcement has provoked heated political debate, with critics arguing it unfairly burdens American taxpayers while proponents insist it serves vital national and international interests.

Since the conflict between Ukraine and Russia erupted in February 2022, the United States has provided more than $174 billion in aid packages to Ukraine.

This unprecedented support has included direct military assistance, humanitarian aid, and substantial economic relief. In April 2024, Congress approved a $61 billion aid package, which included $9.4 billion in “forgivable loans” to address Ukraine’s growing budgetary gap.

The Biden administration’s decision to cancel $4.7 billion of this amount was framed by the State Department as necessary to align with the “national interest” of the United States and its allies, including the EU, NATO, and G7 partners.

A letter to Congress dated November 18 emphasized that the move would bolster Ukraine’s stability in the face of mounting economic pressures.

Ukraine’s economy is heavily reliant on Western aid, with its government estimating a budget deficit of 75 percent for 2025. As of July 2024, the nation’s public debt had surged to $152 billion, with servicing costs rising dramatically from $900 million to $5.2 billion annually.

Kiev’s reliance on Western support has become a linchpin for its economic survival, but this dependency has also fuelled growing frustration among US lawmakers and taxpayers.

President-elect Donald Trump, who will assume office in January, has expressed strong opposition to the Biden administration’s approach. On the campaign trail, Trump maintained that any further US assistance to Ukraine should come exclusively in the form of loans, not outright grants.

Rebranding some aid as loans was a key adjustment that allowed the $61 billion April package to overcome Republican resistance.

Trump’s position reflects a broader scepticism within the Republican Party about the scale and nature of US assistance to Ukraine. Senator Rand Paul, a vocal critic of the debt forgiveness plan, described it as an unjust transfer of financial responsibility to American taxpayers.

“Tonight, I’m forcing a vote on my resolution to prevent Biden from turning Ukraine’s debt into America’s problem,” Paul declared on social media, highlighting the perceived burden on US citizens.

Critics of Biden’s debt forgiveness proposal argue that it sets a dangerous precedent, particularly at a time when the US faces its own fiscal challenges, including rising national debt and economic uncertainty.

Paul and others have characterized the move as a bailout for Ukraine’s government and bureaucratic elite, with minimal accountability for how funds are allocated.

Meanwhile, proponents contend that the cancellation is a strategic necessity. They argue that a financially stable Ukraine is critical to countering Russian aggression and maintaining the credibility of Western alliances.

Supporters also note that the loans were originally designed to be forgivable, emphasizing that their cancellation complies with pre-existing agreements.

Internationally, the move underscores the US’s central role in coordinating Western support for Ukraine. However, it has also highlighted divisions within the global response.

While the G7 finalized a separate $50 billion loan for Ukraine in October, backed by income from frozen Russian assets, tensions remain over the legality and implications of permanently confiscating those funds.

The issue of frozen Russian assets, valued at approximately $300 billion, looms large over the broader conversation about funding Ukraine.

The Biden administration has pushed for these funds to be fully appropriated to aid Ukraine, but the International Monetary Fund (IMF) has resisted, warning that such actions could undermine global trust in the Western financial system.

Moscow has denounced the asset freeze as outright theft, with Russian Finance Minister Anton Siluanov vowing to implement retaliatory measures.

“If Western countries have decided to use our assets and income from our assets, the Russian side will also implement appropriate actions,” Siluanov stated, raising the specter of escalating financial confrontation.

The legal and ethical implications of seizing foreign assets remain contentious. Critics caution that setting such a precedent could backfire on Western nations, particularly if other governments follow suit in future geopolitical conflicts.

As the war in Ukraine grinds on, Western nations face increasing pressure to balance support for Kiev with domestic concerns. Aid fatigue is becoming a significant issue, particularly in the US, where public opinion is sharply divided over the scale of assistance provided to Ukraine.

According to recent polls, a growing number of Americans question whether such extensive aid aligns with US interests. This sentiment is likely to influence Trump’s policy approach, which emphasizes burden-sharing among allies and a more transactional relationship with Ukraine.

Biden’s decision to forgive $4.7 billion in Ukrainian debt comes at a critical juncture, signalling a final push to solidify US support for Kiev before Trump takes office.

However, the move also risks deepening political polarization, with Republicans poised to challenge the initiative in Congress.As Biden prepares to leave office, his decision to cancel billions in Ukrainian debt reflects the complex and contentious nature of US foreign aid policy.

While supporters argue that the move is essential to bolstering Ukraine and countering Russian aggression, critics see it as an unjust burden on American taxpayers and a potential overreach of executive authority.

With Trump set to reassess US support for Ukraine, the debate over debt forgiveness and broader aid strategies is far from over.

The next administration will inherit a complex web of financial, political, and ethical challenges, ensuring that Ukraine’s reliance on Western assistance remains a defining issue in US foreign policy for years to come.