Ukraine's 2026 budget, defence needs are covered, EU says

BRUSSELS, Oct 1 (Reuters) - The European Commission and Ukraine said on Thursday they had identified the funds to cover the country's budget and defence needs for 2026 and agreed to swiftly unlock more cash for 2027.

"We will also begin work on identifying additional budgetary and defence needs," the European Union's executive body and Ukraine said in a joint statement.

As it continues to fight against Russia's 2022 invasion, Ukraine is relying heavily on payouts from a €90 billion loan from the EU for this year and next.

Kyiv has been struggling to close a $27 billion funding gap to ensure it can still conduct combat operations at the start of 2027, Prime Minister Sergii Koretskyi said on Wednesday.

But Thursday's joint statement said funds had been identified to cover spending for the remainder of this year - although it also alluded to the need for Ukraine to meet the EU's political reform benchmarks to access all the cash.

"Today, through coordinated joint efforts, we have identified the means to cover Ukraine's budget and defence needs for 2026. We have also reconfirmed the steps needed to ensure their timely release," the statement said.

Ukraine and the EU Commission also agreed to "move forward swiftly with the allocation of €45 billion" from the EU loan for 2027, "subject to the established conditions".

Bloomberg reported earlier the EU had rejected a request from Ukraine to speed up loan payouts to cover its unexpected shortfall, citing people familiar with the matter.

But an EU official familiar with the talks disputed that interpretation. "We have not closed any door," said the official, speaking on condition of anonymity to discuss confidential discussions.

"Today we had a very productive meeting that ended with a clear path forward that ensures the necessary means for 2026 and start work together on 2027."

A Commission spokesperson had no immediate comment and there was no immediate additional comment from Ukrainian officials.

($1 = 0.8911 euros)

(Reporting by Nethra Sailesh in Bengaluru, Inti Landauro in Brussels; editing by Philippa Fletcher)