BERLIN (AFP): G7 partners met in Germany on Thursday hoping to find a solution for Kyiv’s budget troubles as the fallout from Russia’s invasion of Ukraine continues to roil the global economy.
“I’m quite optimistic that we will be able at this G7 meeting to raise funding which allows Ukraine to defend itself over the next months,” German Finance Minister Christian Lindner said at the opening of the meeting in Koenigswinter, near Bonn.
The outbreak of the war has blown a hole in Kyiv’s finances, with tax incomes having fallen sharply.
A “double-digit billion euro” figure was needed to assure Ukraine’s “liquidity”, Lindner said.
The war in Ukraine has triggered a sharp rice in energy prices, raw materials and agricultural goods, heaping pressure on the global economy.
In Europe, the continent’s heavy reliance on Russian energy imports also leaves it exposed to further fuel price rises or potential disruptions to supply.
“The bilateral and multilateral support announced so far will not be sufficient to address Ukraine’s needs, even in the short term,” US Treasury Secretary Janet Yellen said in a speech in Brussels on Tuesday.
Yellen, who is attending the Koenigswinter gathering of the Group of Seven industrialised nations, called on US partners to “join us in increasing their financial support” for war-scarred Ukraine.
The United States has forged ahead with a $40 billion (38 billion euros) aid package to fill Kyiv’s coffers and military stores.
Ahead of the G7 meeting, the European Union also proposed to boost its aid to Ukraine by up to nine billion euros.
The war has left the Ukraine with a current budget shortfall of around $5 billion a month, the government estimates.
Around $7.5 billion of the US aid package is earmarked to help plug the hole in Ukraine’s government budget caused by the war, a source close to the G7 organisers indicated.
Ukrainian Prime Minister Denys Shmygal is set to address the G7 finance ministers’ meeting by video link.
Besides Germany, the other members of the group are Canada, France, Italy, Japan, Britain and the United States.
The outbreak of the Ukraine war has diminished growth prospects globally and pushed already elevated inflation rates even higher.
The US Federal Reserve’s decision to raise interest rates aggressively in response to high inflation rates has created concerns that the central bank could step on the brakes too hard, hurting growth.
Yellen said Wednesday she did not “expect” a recession in the United States, but warned of the risks for Europe.
The continent, which has also been battling decades-high inflation, was “more vulnerable and of course more exposed on the energy front” as prices rise following the Russian invasion of Ukraine, she said.
Europe’s reliance on Russian energy imports for much of its needs means further disruptions to supply could come at a heavy cost for industry.
Shortages of raw materials and agricultural products caused by the conflict also threatened to heap extra pressure on consumers.
The rise in energy and food prices was being felt particularly hard in developing nations, Lindner said, just as rising dollar interest rates made their debts harder to finance.
The combined pressures could quickly lead to a “critical situation”, the G7 host added, calling on China, one of the world’s biggest creditors, to be more transparent about its lending.