G7 promises billions of dollars to a new lifeline in the Ukrainian economy

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Königswinter — Group of Seven financial leaders announced billions of dollars in new aid to Ukraine on Friday, enough to highlight the country’s devastated economy as long as it fights Russia’s invasion. Expected to promise funding.

Finance Ministers and Central Bank Governors (G7 democracies) from the United States, Japan, Canada, the United Kingdom, Germany, France and Italy also follow sanctions that put pressure on Russia to end the war that began on February 24. Discussing steps.

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In a draft group communiqué published later Friday, G7 officials cited $ 18.4 billion in budget support for Ukraine this year, including a recent commitment of $ 9.2 billion.

“The message was’we stand behind Ukraine’,” US Treasury Secretary Janet Yellen told reporters late Thursday. “We will put together the resources they need to overcome this,” Yellen said.

The session scheduled for Friday will include potential debt crises under pressure from rising food and energy prices, progress in global corporate tax reform, and efforts to fund the transition to renewable energy. And also includes a discussion of the current state of the COVID-19 pandemic.

Russian energy curb

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During the session, G7 authorities also exported energy, including a gradual ban proposed by the European Union, the formation of a buyer’s cartel to limit the price of Russian crude oil, and the imposition of import tariffs on Russian oil. Discussing proposals to reduce Russia’s profits from.

The latter was highlighted by US authorities as a way to limit Moscow’s oil profits while maintaining Russia’s crude oil supply in the market to avoid price spikes.

“No actual strategy has been embodied,” Yellen said of those arguments.

Another G7 official said price caps and tariffs were problematic, as producers had little incentive to comply and consumers could bear the brunt of additional costs.

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In the draft communiqué, the G7 welcomed the European Commission’s proposal to lend € 9 billion ($ 9.52 billion) to Ukraine on Wednesday. He also mentioned that the European Bank for Reconstruction and Development and the International Finance Corporation are planning to support $ 3.4 billion, but it is not clear if it is part of $ 18.4 billion or another commitment. There was not.

Yellen said the $ 40 billion US aid bill to Ukraine, which was overwhelmingly passed by the US Senate on Thursday, includes about $ 7.5 billion in new financial aid.

Ukraine estimates that it will need about $ 5 billion a month to pay salaries for civil servants and maintain administrative function despite the daily destruction by Russia.

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The war is groundbreaking for Western nations, rethinking decades-old relations with Russia not only in terms of security, but also in terms of energy, food and global supply alliances from microchips to rare earths. I am forced to do it.

Inflation Beast tame

In a broader sense, G7 policy makers are addressing the question of how to curb inflation and increase sanctions pressure on Russia without causing a recession.

More and more officials have come up with the term “stagflation”. This is a horrifying 1970s combination of sustained price increases, coupled with economic stagnation.

“The G7 central bank is closely monitoring the impact of price pressures on inflation expectations and will continue to properly adjust the pace of monetary tightening in a data-dependent and clearly communicated manner,” the draft said.

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They said, “We guarantee that inflation expectations remain well-fixed, keeping in mind that we will protect the recovery and limit the negative spillover effects across the country.”

Most of Ukraine’s aid efforts were to fund Kyiv’s imminent cash demand, but G7 officials called for support in long-term recovery and recovery.

Economists’ estimates of the cost of rebuilding Ukraine vary widely between € 500 billion and € 2 trillion, depending on assumptions about the length of the conflict and the extent of the destruction. ($ 1 = € 0.9452) (Additional report by Chirstian Kraemer, Leigh Thomas, Francesco Canepa, Jan Strupczewski, edited by Tomasz Janowski)