by Alan Rappeport
The United States and Europe are close to finalizing a plan to provide Ukraine with a $50 billion loan backed by Russia’s frozen central bank assets by the end of the year, Treasury Secretary Janet L. Yellen said on Tuesday.
An announcement of the loan could come this week as finance ministers and central bank governors convene in Washington for the annual meetings of the International Monetary Fund and the World Bank.
American and European policymakers have been negotiating for months over how to use Russia’s central bank reserves, most of which are being held in Europe, to aid Ukraine. They settled on a plan earlier this year to use the interest earned on the funds to secure the loan, but a variety of legal obstacles stalled the process.
Ms. Yellen said on Tuesday that all of the significant issues had been worked out and that the United States would be contributing $20 billion of the $50 billion loan.“This is a way of making Russia bear the cost and the expense of the damage that it’s inflicting on Ukraine,” Ms. Yellen said at a news conference.
Ms. Yellen said that American taxpayers would not bear any of those costs because the loan would be repaid using interest from Russia’s central bank reserves, which will remain immobilized in Europe until the war ends. She added that even if a truce was reached, the loans would still be repaid using Russian funds.
The U.S. government is able to offer loans to countries if there is a high level of certainty that the money will be repaid. The Biden administration has been working with European officials to ensure that Russia’s central bank funds will remain frozen so that the loan is secure.
The Treasury secretary also said that the United States expected to impose new sanctions as soon as next week targeting intermediaries in countries that are helping Russia supply its military.
Ukraine is one of several matters that economic leaders will be discussing this week as they convene at a pivotal moment for the world economy.As Treasury secretary, Ms. Yellen has been focused on bolstering institutions such as the World Bank and the I.M.F. to provide a counterbalance to China, which has gained global influence as the world’s largest creditor.
In an interview on Monday, ahead of the meetings, Ms. Yellen rebuked China’s “opaque” lending practices and urged global financial institutions and other creditors to accelerate debt relief to low- and middle-income countries.
“It’s a substantial burden and can impede their investments in things that will promote sustainable development or dealing with pandemics or climate change,” Ms. Yellen said of the debt burdens of low- and middle-income countries.
The I.M.F. and the World Bank have faced backlash in recent years for moving too slowly in their efforts to help struggling economies and for pushing nations to enact economic reform measures, such as sharp spending cuts, that have brought resistance and social unrest.
The Treasury secretary hailed signs of progress at multilateral institutions like the monetary fund and the World Bank in a speech on Tuesday that highlighted an expansion of lending capacity and faster approval of new projects under the direction of the Biden administration.Global debt continues to be a problem, however, and the United States has been pushing for a broader international relief initiative that goes beyond efforts to aid countries that are on the brink of defaulting on their loans.The I.M.F. estimated this month that global public debt would exceed $100 trillion this year. The World Bank warned that poverty-reduction efforts had reached a standstill because of weak growth in poor countries that were hardest hit by the pandemic.
The World Bank estimates that nearly 700 million people are in extreme poverty, which is defined as living on less than $2.15 per day. That is projected to decline to 622 million by 2030, but the pace of poverty alleviation is much slower than it was during the decade before the pandemic.
Ms. Yellen pointed to a framework unveiled this year by the United States and Kenya as an example of how debt relief and economic aid could be reimagined and expanded.
In May, the Biden administration announced the “Nairobi-Washington Vision” when President William Ruto of Kenya visited the White House and called for the creation of coordinated aid packages for “high-ambition countries” that want to invest in clean energy projects.
