World Bank Approves Financial Intermediary Fund for Ukraine

By Andrea Shalal

WASHINGTON (Reuters) – The World Bank's executive board approved the creation of a financial intermediary fund (FIF) to support Ukraine on Thursday, with contributions expected from the United States, Canada, and Japan, according to three sources familiar with the decision.

The only objection to the vote came from Russia, as reported by two of the sources.

The fund, to be administered by the World Bank, will help fulfill a pledge by the Group of Seven (G7) rich democracies to provide Ukraine with up to $50 billion in additional funding by the end of the year. This support comes as Ukraine continues to battle Russia's invasion, which began over two years ago.

While exact contributions from the U.S., Japan, and Canada are still being finalized, the funding will be backed by interest from frozen Russian sovereign assets, one source noted.

The World Bank's vote followed a day after European Union envoys agreed to provide Ukraine with up to 35 billion euros ($38.3 billion) as part of their share of the larger loan planned by the G7 nations, also backed by proceeds from frozen Russian central bank assets, the Council of the EU stated.

Josh Lipsky, senior director at the Atlantic Council's GeoEconomics Center, emphasized that these actions would enable G7 countries to significantly boost financial support for Ukraine, honoring the promises made at the G7 leaders' summit in June. "This is a game-changing amount of money," he stated, highlighting that Ukraine's war spending in 2023 is estimated to be around $80 to $90 billion. "It's real resources on the ground that can make a difference."

The U.S. Treasury Department and White House declined to comment, and no remarks were immediately available from Japan or Canada.

U.S. President Joe Biden spoke with German Chancellor Olaf Scholz regarding Ukraine and other topics on Thursday, after postponing his trip to Germany due to Hurricane Milton, as per the White House.

World Bank President Ajay Banga mentioned in May his openness to managing a G7 loan fund for Ukraine, funded by earnings from frozen Russian sovereign assets for nonmilitary purposes. These assets were frozen shortly after Russia's full-scale invasion of Ukraine in February 2022.

Banga indicated that the World Bank has successful experience in managing similar nonmilitary donor fund facilities, such as one for Afghanistan, and could replicate these efforts for Ukraine's loan fund.

The new fund will allow non-European countries to engage in the broader loan initiative.

The G7 and the EU previously announced they would provide a $50 billion loan to assist Ukraine, financed by profits generated from immobilized Russian assets in the West. Over two-thirds of these assets, approximately 210 billion euros, are currently held in the EU, predominantly by Belgium's depository Euroclear.

($1 = 0.9146 euro)