Money for Ukraine high on G7 agenda; Inflation and food are things to worry about

Finance leaders from the Group of Seven (G7) are expected to agree on Thursday and Friday to help Ukraine pay its bills in the coming months, but runaway inflation, climate change, supply chain and the looming food crisis.

Finance ministers and central bank governors from the United States, Japan, Canada, Britain, Germany, France and Italy – the G7 – are holding discussions as Ukraine, which was invaded by Russia on February 24, is struggling to repel the attack and found himself short of money.

“We must guarantee the liquidity of the Ukrainian state,” German Finance Minister Christian Lindner, whose country holds the group’s rotating chairmanship, told reporters as he entered the talks.

“I am very optimistic that we will be able at this G7 meeting to raise funds that will allow Ukraine to defend itself in the next few months,” he said.

“The war in Ukraine … also carries additional risks for the development of the world economy … inflation, but also the lack of recovery from the pandemic. Therefore, we need to talk about what is possible let’s work together in our respective areas of responsibility to avoid stagflation scenarios, ”Lindner said.

The war in Ukraine was a game-changer for the Western powers, forcing them to rethink decades-old relations with Russia, not only in terms of security, but also in terms of energy, food and supply alliances. around the world, from microchips to rare earths.

“Ukraine is covering these meetings. But there are other issues that need to be discussed,” said a G7 official, who asked not to be named, adding that debt, international taxation, climate change and global health is on the table.

Ukraine estimates its financial needs at 5 billion dollars per month to continue paying the salaries of public employees and to run the administration despite the daily devastation caused by Russia.

SHORT TERM MONEY, LONG TERM RECONSTRUCTION

The short-term funding package of approximately $ 15 billion to be agreed by the G7 will 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 meet kyiv’s needs up to end of June.

Japan will double its aid to Ukraine to $ 600 million to help with its short -term needs, Prime Minister Fumio Kishida told reporters on Thursday.

The EU executive also proposed to set up a fund of unspecified amounts of grants and loans for Ukraine, possibly borrowed by the EU ally, to pay for its reconstruction after the war.

Some economists estimate that such a project would require between 500 billion euros and 2 trillion euros (524 billion to 2.09 trillion dollars), with estimates often changing depending on the duration of the fighting and the extent of the destruction. .

At a volume of this magnitude, the EU is considering not only a new standard borrowing project, modeled on pandemic recovery funds, but also to extract Russia’s assets that are now frozen in the EU, as sources of financing. .

Some countries, such as Germany, however, argue that the idea, although politically interesting, rests on a weak legal foundation.

U.S. officials emphasize that it is too early to draw up funding for a massive reconstruction plan for Ukraine and Washington wants to focus talks on kyiv’s immediate budget needs over the next three months.

“After all, the rebuilding needs are almost in the future,” a U.S. Treasury official said. “That’s why we are focusing more on Ukraine’s budget needs over the next three months than on reconstruction, Marshall Plans and asset confiscation.” ($ 1 = 0.9550 euro) (Reporting by Paul Carrell, Chirstian Kraemer, Leigh Thomas, Francesco Canepa, Leika Kihara, David Lawder and Jan Strupczewski; editing by Matthew Lewis and Tomasz Janowski)

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