Ukraine has been given $18.4 billion by the Group of Seven financial leaders to help Kyiv pay its bills in coming months, with the organisation saying it will support the country during its war with Russia and offer more support if needed.
Finance ministers and central bank governors from the US, Japan, Canada, UK, Germany, France and Italy — the G7 — are holding talks as Ukraine is running out of cash and struggling to fend off the Russian attack.
“In 2022, we have mobilised $18.4bn of budget support, including $9.2bn of recent commitments,” the draft communique seen by Reuters said.
“We will continue to stand by Ukraine throughout this war and beyond and are prepared to do more as needed,” it said.
In the draft, the G7 welcomed the European Commission's proposal on Wednesday to lend €9bn ($9.6bn) to Ukraine and noted that the European Bank for Reconstruction and Development and the International Financial Corporation planned support worth $3.4bn.
It was not clear if these funds were part of the $18.4bn or separate.
Earlier on Thursday, German Finance Minister Christian Lindner said his country would grant Ukraine €1bn ($1.1bn) and Japan pledged to double its aid for Ukraine to $600 million to help it cover its near-term needs.
Ukraine estimates it needs about $5bn a month to keep public employees' salaries paid and the administration working as Russia wreaks daily destruction.
The war has been a game-changer for western powers, forcing them to rethink decades-old relations with Russia not only in terms of security, but also in energy, food and global supply alliances in areas such as microchips and rare earths.
More broadly, the G7 policymakers are wrestling with the question of how to contain inflation and increase sanctions pressure on Russia without causing a recession.
More and more officials have brought up the term “stagflation” — the dreaded 1970s combination of persistent price increases coupled with economic stagnation.
“G7 central banks are closely monitoring the impact of price pressures on inflation expectations and will continue to appropriately calibrate the pace of monetary policy tightening in a data-dependent and clearly communicated manner, ensuring that inflation expectations remain well anchored, while being mindful to safeguard the recovery and limit negative cross-country spillovers,” the draft said.
The European Commission proposed on Wednesday to set up a fund of unspecified size of grants and loans for Ukraine, possibly jointly borrowed by the EU, to pay for postwar reconstruction.
The G7 said they were supportive, but avoided any detail.
“We call on all partners to join us in supporting Ukraine´s long-term recovery and to ensure the massive joint effort for reconstruction is closely co-ordinated, including with the Ukrainian authorities and international financial institutions,” the draft said.
Economists' estimates of the cost of rebuilding Ukraine vary widely between €500bn and €2 trillion ($524bn to $2.09tn), depending on the assumptions on the length of the conflict and the scope of the destruction.
With sums of such magnitude, the EU is considering not only a new joint borrowing project, modelled on the pandemic recovery fund, but also seizing now frozen Russian assets in the EU as sources of financing.
Some countries such as Germany, however, say that the idea, though politically interesting, would be on shaky legal grounds and the G7 draft communique did not mention the issue.