The Treasury Department will push trading partners to expand aid to Ukraine when the International Monetary Fund and World Bank hold their annual spring meetings later this week, officials said Monday.
Russia’s bloodless takeover last month of the Crimean peninsula sparked U.S. and European Union sanctions, and the Obama administration is now working on ways to bolster the struggling Ukrainian economy.
“The geopolitical situation with Russia will certain be something discussed this weekend, certainly in bilateral and other discussions,” a senior Treasury Department official said, briefing reporters on condition of anonymity in order to more freely discuss the agenda of Secretary Jack Lew. “There is definitely desire to help Ukraine chart its own financial and economic future.”
The IMF reached a stand-by agreement with Ukraine late last month, giving the nation access to about $27 billion in international funds over two years, anywhere between $14 billion and $18 billion from the IMF. The United States has offered, through a recent congressional vote, $1 billion in loan guarantees to help Ukraine right its listing economy.
The country’s interim prime minister, Arseniy Yatsenyuk, told reporters in late March that if his country was a business, it’d be declared bankrupt. Many nations are hesitant to lend to Ukraine, however, because the nation lacks transparency in much of its finances. The Obama administration has gingerly danced around the issue of widespread corruption in Ukraine, which was at the heart of protests earlier this year that led to the collapse of the prior government.
While much of the discussion will be on helping Ukraine’s interim government ready for national elections and bolster the economy, further sanctions on Russia are likely to get attention too this weekend.
Russia’s cross-border foray is proving costly to its economy, insisted the senior official, pointing to capital flight from Russia exceeding $70 billion this year, compared to $63 billion all of last year. Russia’s ruble has tumbled on currency markets and its central bank has had to jack up interest rates in a bid to prevent an even broader exodus of international investment.
“All of this is imposing costs on the Russian economy,” said the official, noting Russia’s own growth forecasts have been shaved by at least a full percentage point and foreign investors are now skittish. “You can see that investors are already worried.”