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G-7 to Discuss Ukraine Funding Gap
From the Wall Street Journal of Sat, 20 Dec 2014 11:23:12 EST

BRUSSELS—Senior officials from the Group of Seven developed nations will discuss Ukraine’s financing needs on Saturday afternoon, according to three European officials, as efforts continue to fill a funding gap estimated at around $15 billion through early 2016.

No final decisions are expected in Saturday’s call, which is being described as taking stock of Ukraine’s additional needs and where that assistance could come from. It is still far from clear, officials said Friday, how the gap will be filled.

European Union leaders on Thursday evening discussed Ukraine’s financial situation, which has grown acute in recent weeks as its currency slid and the country’s reserves dipped under $10 billion. On Friday, an International Monetary Fund team confirmed it would head back to Kiev in January to continue discussions on the next disbursement of aid.

Officials briefed on Thursday’s discussions said no figures were discussed by the EU leaders and that there have been no offers by any of the EU’s 28 members to provide bilateral assistance to Ukraine.

Any new assistance for Ukraine would come on top of $30 billion already promised from international creditors, including $17 billion from the IMF.

At a meeting last week in Istanbul, Germany floated a figure of $3 billion for the suggested EU contribution to Ukraine’s financing needs for 2015 and 2016. EU officials said Friday the most that could come from the EU budget in 2015 for a new Ukraine balance-of-payments loan was about $1.5 billion.

It is broadly agreed that any additional assistance would need to be tied to clear promises of reform from Ukraine and would come as part of a new international package.

Speaking in the European Parliament in Strasbourg on Wednesday, European Commission President Jean-Claude Juncker cited the $15 billion funding need for Ukraine—a rough estimate that originated from the IMF. Mr. Juncker said the EU’s executive body has only “a small margin of flexibility for additional financing” for Ukraine next year. He urged European governments to contribute.

The U.S. Congress has authorized new loan guarantees for Ukraine that could allow Kiev to issue at least $1 billion, perhaps as much as $2 billion, in new bonds backed by the U.S. EU officials said they hope that other G-7 partners, such as Japan and Canada, could make a contribution and that the IMF will agree to additional funding to help rebuild Ukraine’s reserves.

The G-7 call will follow a downgrade of Ukrainian debt by Standard & Poor’s rating firm Friday. The ratings company said that a “default could become inevitable in the next few months if circumstances do not change, for instance if additional international financial support is not forthcoming.”

—Ian Talley contributed to this article.

Write to Laurence Norman at laurence.norman@wsj.com and Bertrand Benoit at bertrand.benoit@wsj.com



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