Monetary aid for Ukraine, world food crisis and inflation top G7 agenda

The G7’s short-term package would cover three months of Ukraine’s needs.


G7 finance leaders are likely to focus on Thursday and Friday on how to help Ukraine pay its bills, with post-war reconstruction, rising global inflation, climate change, supply chains and the imminent food crisis also on the agenda.

Finance ministers and central bank governors from the United States, Japan, Canada, Britain, Germany, France and Italy (the G7) will hold talks as Ukraine, invaded by Russia on February 24, struggles to fend off attack.

The Ukraine war is a game changer for Western powers because it forces them to rethink decades-old relations with Russia not only in terms of security, but also in energy, food and global supply alliances, from microchips to rare earths.

“Ukraine is overshadowing these meetings. But there are other issues that need to be discussed,” said a G7 official, who asked not to be identified, adding that debt, international taxes, climate change and global health were all under discussion.

Ukraine estimates its financial needs at $5 billion a month to keep civil servants’ salaries paid and the administration running despite the daily destruction wrought by Russia.

Russia calls its actions in Ukraine a “special operation” which it says is designed not to occupy territory but to destroy its southern neighbor’s military capabilities and capture what it sees as dangerous nationalists.

The short-term financing package to be agreed by the G7 would cover three months of Ukraine’s needs.

The European Commission on Wednesday offered to provide up to 9 billion euros ($9.44 billion) in loans to Ukraine, financed by EU loans guaranteed by EU governments, to cover kyiv’s needs until the end of June.

The Commission has also proposed setting up a fund of unspecified size of grants and loans for Ukraine, possibly jointly loaned by the EU, to pay for the country’s reconstruction after the war ends.

Some economists estimate that the financial need for such a project ranges from €500 billion to €2 trillion ($524,000 to $2.09 trillion), with estimates changing frequently depending on the duration of the conflict and the extent of destruction.

With sums of that magnitude coming into play, the EU is considering not only a new joint loan project, inspired by the pandemic recovery fund, but also the confiscation of Russian assets now frozen in the EU, as sources of funding. .

Some countries like Germany, however, say the idea, while politically interesting, would have shaky legal foundations.

US officials stress that it is too early to plan funding for a massive reconstruction plan for Ukraine. Washington wants discussions to focus on meeting kyiv’s immediate budget needs for the next three months.

“After all, these reconstruction needs are mostly a bit in the future,” a US Treasury official said. “That’s why we’re focusing more on Ukraine’s budget needs in the next three months than in reconstruction, the Marshall Plans and the confiscation of assets”.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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