G7 pledges $20 billion to support Ukraine’s budget

Finance ministers from major Group of Seven economies have pledged nearly $20 billion in budget support to Ukraine as the country struggles to meet its spending needs in the face of the Russian invasion.

“Ukraine’s liquidity is assured for the foreseeable future,” German Finance Minister Christian Lindner told reporters after hosting his G7 counterparts at a meeting in the western town of Königswinter of Germany.

The meeting also focused on the danger posed to the global economy by rising inflation, which is pushing up the prices of raw materials, energy and food, and which Lindner says has played a role “very important” in the ministers’ deliberations.

He urged central banks to address the issue. “Central banks are very, very, very independent, but they have a very, very, very big responsibility in these times,” he said.

Joachim Nagel, head of the Bundesbank, who took part in the meeting with other G7 central bank chiefs, said there was an inflation risk linked to what he called the “three Ds”. – de-globalization, where countries sever their trade links with each other; decarbonization, where economies adopt green policies to reduce their CO₂ production and their demography.

The G7 also called for a rapid development of financial asset regulation based on crypto technologies, immediately after the sharp declines in the value of nascent class assets.

The International Financial Stability Board and other international authorities should “advance the rapid development and implementation of consistent and comprehensive regulation of crypto-asset issuers and service providers,” the G7 said.

But the war in Ukraine, which has had repercussions throughout the global economy, dominated the discussions. The final communiqué noted that the war was causing “global economic disruption, affecting the security of global energy supplies, food production and exports of food and agricultural products, and the functioning of global supply chains generally”.

German Finance Minister Christian Lindner and Bundesbank President Joachim Nagel address a press conference after their country hosted the G7 summit © Benjamin Westhoff/Reuters

The $19.8 billion aid figure agreed by the G7 includes $9.5 billion pledged at the meeting. Of this amount, $8.5 billion are grants and the rest guarantees or loans. It also includes $10.3 billion that has already been paid or pledged by the IMF.

Lindner said that in addition, the European Bank for Reconstruction and Development and the World Bank are providing $3.4 billion to support Ukrainian state-owned enterprises and the private sector.

The G7 announcement came after the US Senate approved more than $40 billion in aid to Ukraine. From there, the United States contributes $7.5 billion to the G7 plan.

The money mobilized by the G7 is intended to cover Ukraine’s urgent short-term financing needs so that it can provide basic services and pay public sector workers and pensions during a war that has devastated its country. economy and strained its finances.

“We have agreed that Ukraine’s financial situation should have no bearing on Ukraine’s ability to successfully defend itself,” Lindner said. “We must do everything we can to end this war.”

He said the money was in addition to the humanitarian and military aid the West is providing to Ukraine.

The G7 said the group would “continue to support Ukraine throughout this war and beyond and stand ready to do more if needed.”

“We are working closely with Ukraine to preserve its macroeconomic stability in the face of the challenges posed by Russia’s war of aggression, the massive destruction of critical infrastructure and the disruption of traditional shipping routes for Ukrainian exports,” he said. said the group.

On crypto, the meeting’s final statement emphasized the need for “stronger regulatory disclosure and reporting,” particularly on the nature of reserve assets meant to back so-called stablecoins, whose value is linked to that of the US dollar.

The G7 said no stablecoin project should start operating until it has adequately met “relevant legal, regulatory and oversight requirements through proper design and adhering to applicable standards.”

This month, Tether, the largest stablecoin provider, declined to provide the Financial Times with detailed information about the company’s reserves.

Comments are closed.