Canadian Finance Minister Joe Oliver opened the door to a bigger financial aid package for Ukraine, acknowledging publicly Friday that the current proposal could be too small to stabilize the besieged country's economy.
The International Monetary Fund (IMF) last month determined, after its officials spent several weeks in Kiev, that Ukraine could require as much as $27-billion (U.S.) to cover its financing needs over the next two years. The Washington-based fund, which is a lender of last resort for its 188 member countries, said it could contribute between $14-billion and $18-billion, depending on the level of contributions from other donors.
"We'll need more than the numbers the IMF are currently looking at, I believe, in the Ukraine," Mr. Oliver told reporters after the conclusion of a meeting of Group of 20 finance ministers and central bank governors in Washington. "This is an issue that is subject to continual study and review."
The question of financing is critical to the West's response to Russia's military aggression at Ukraine's borders. A military response by the North Atlantic Treaty Organization, the United States or Europe would risk more bloodshed. An economic rescue, on the other hand, would bolster Ukraine's government and counter restive Russian speakers in the country's east who argue they would be better off joining Russia.
Ukraine's fate is a key issue at gatherings of international economic leaders this week. The G20, which rarely singles out specific countries in its statements, said that it was "monitoring" the situation in Ukraine, "mindful of any risks to economic and financial stability." The group, which includes big economies ranging from the United States to Argentina, said the IMF and the World Bank were "best placed" to lead the international response to Ukraine's economic crisis.
Moody's Investors Service, which grades countries and companies on their ability to repay debt, cut Ukraine's rating last month and indicated further downgrades were possible. Moody's estimated that Ukraine's inflation-adjusted gross domestic product could contract by as much as 10 per cent this year and that its debt as a percentage of the size of the economy could increase to 60 per cent from about 40 per cent currently.
Ukraine's finance minister, Oleksandr Shlapak, is in Washington to press his government's case for help. Finance ministers and central bank governors are in Washington for the IMF's annual spring meetings, and Ukraine's needs are on the agenda. The fund has a fraught history with Ukraine, as previous governments have reneged on promises made to secure IMF lending, forcing the fund to suspend payments.
Moody's said it sees a "high risk" that any IMF program will once again go off track over the next 12 to 18 months. "We have fulfilled all preliminary requirements we have agreed [to] with the IMF," Mr. Shlapak told Bloomberg News earlier this week.
Working in Mr. Shlapak's favour is Russia's apparent willingness to co-operate on the international bailout – in part, because the country is one of Ukraine's biggest creditors, so it has a financial incentive to help its neighbour avoid a default.
The G20 gathering promised tension. It was the first meeting of senior officials from the group since Russia put troops in Crimea and annexed the region. Canada, the United States and its allies in the smaller G7 suspended association with Russia under the auspices of the G8, which was created after the Cold War to recognize Russia's turn from Communism. All belong to the G20, however, and Russia's presence is well protected by other members such as China and India.
"I was always one for seeing the G20 mandate expand," Gordon Smith, a distinguished fellow at the Centre for International Governance Innovation and a former Canadian deputy minister of foreign affairs, said in an interview earlier this week. He's rethinking that now. "The G20 will go back to international economic questions," Mr. Smith said from Victoria.
That appears to be what happened.
As meetings began Thursday evening, Russia was placed between the Australian chairman and the representative from the New Partnership for Africa's Development, a group of African leaders created in 2001 to promote initiatives aimed at poverty reduction and economic growth. In diplomatic terms, that is one step removed from being removed from the room: Russia's representatives were positioned as far away from its rivals in the G7 as the rectangular table would allow.
Yet Australian Treasurer Joe Hockey insisted Russia played a constructive role at the meeting. Russia held the presidency of the G20 last year, and as such, its officials were highly involved in the preparation of the final statement, Mr. Hockey said. "There was no tension at all," he said at a press conference.
Mr. Oliver, who was attending his first G20 gathering, also said the meeting was all business.
"Russia's interventions were directly related to the issues that all the other countries were talking about," Mr. Oliver said. "One wouldn't have known that there was an issue, actually."