Exclusive-World Bank board approves new Ukraine fund, with money from US, Japan, Canada, sources say

A general view shows Independence Square in central Kyiv, Ukraine February 25, 2022. Valentyn Ogirenko

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

The only objection to the vote came from Russia, two of the sources familiar with the vote said.

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

Exact amounts to be contributed by the U.S., Japan and Canada are still being worked out, but will be backed by interest from frozen Russian sovereign assets, one of the sources said.

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

Josh Lipsky, senior director of the Atlantic Council's GeoEconomics Center, said the two actions would allow G7 countries to provide a significant funding boost to Ukraine, and make good on promises made at a G7 leaders summit in June.

"This is a game-changing amount of money," he said, noting that Ukraine's spending on the war in 2023 was around $80 billion 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. No comment was immediately available from Japan or Canada.

U.S. President Joe Biden spoke with German Chancellor Olaf Scholz about Ukraine and other topics on Thursday, after Biden postponed his trip to Germany in anticipation of Hurricane Milton, the White House said.

World Bank President Ajay Banga told Reuters in May that he was "absolutely" open to the idea of managing a G7 loan fund for Ukraine backed by the earnings from frozen Russian sovereign assets - at least for nonmilitary purposes.

The assets were frozen shortly after Russia launched a full-scale invasion of Ukraine in February 2022.

Banga in May said the World Bank had ample experience in managing similar nonmilitary donor fund facilities, including one for Afghanistan. It could replicate that work for a Ukraine loan, he said.

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

The G7 and the EU announced in June they would provide a $50 billion loan to help Ukraine, serviced by profits generated by Russian assets immobilized in the West.

More than two thirds of the assets, some 210 billion euros, are stuck in the 27-nation EU and of those, most are held by Belgium's depository Euroclear.

($1 = 0.9146 euro)

-(Reuters)