Bank of England joins efforts to protect Ukraine’s assets Business News

The Bank of England has joined a host of other central banks and international institutions to help keep Ukraine’s assets safe and contribute to its eventual economic recovery, The Independent has learned.

Andrew Bailey, the governor, spoke on the phone with his Ukrainian counterpart, Kyrylo Shevchenko, according to sources familiar with the bank’s operations.

The conversation is part of a wider effort by the UK’s central bank, government and other allied institutions, to protect assets that might otherwise fall into Russian hands as part of the invasion in Classes.

Central banks around the world have also sought to help protect Ukraine’s financial infrastructure and key data, The Independent understand. Meanwhile, Ukrainian central bank workers have taken their operations underground in order to keep the Ukrainian financial system functioning.

British officials are considering what role Britain could play in helping to rebuild the country’s economy as peace is finally secured after the Russian invasion.

The Washington-based global lender of last resort, the International Monetary Fund (IMF), said Ukraine’s economy could shrink by 10% this year, and much more if the conflict drags on.

“A growing loss of physical capital stock and massive migration would lead to a much more pronounced contraction in output, a collapse in trade flows, a further reduced capacity to collect taxes and a greater deterioration in the fiscal and external positions,” he said. said the IMF.

The safety of Ukrainian central bank reserves is an urgent concern. These are used to meet the balance of payments needs of an economy, ensuring that it can pay its way. Ukraine held about $18.8 billion in foreign exchange, gold and special drawing rights reserves in 2017, according to the CIA World Factbook.

The physical, monetary or bond assets of a central bank are often partly held in other countries. This includes gold reserves.

A recent example of protecting a national asset against a regime Western governments find distasteful was in the aftermath of the Taliban takeover of Afghanistan. Following the regime change, Afghanistan’s foreign exchange reserves and gold were frozen in central banks, including the US Federal Reserve and the Bank of England.

With strict sanctions already in place, it is unlikely that Russia will be able to seize Ukrainian central bank assets and may not even use its own.

According to public statements on the National Bank of Ukraine website, the central bank raised 11.8 billion Ukrainian hryvnia in order to support its war effort, which equates to around £300 million. It’s in addition support from various international institutions, including $1.4 billion from the IMF.

Yet for Russia it is “highly, highly unlikely” that it will be able to access its special drawing rights at MI, as it will not be able to convert reserves into foreign currency with the help of financial institutions, a said IMF chief Kristalina Georgieva. said March 10.

Ms Georgieva added on March 13 in a separate interview that it was not “unlikely” that Russia would default on its sovereign debt payments. This would, however, have a limited impact on the global financial system, given the relative size of Russia compared to other economies.

Ukraine’s economy suffered after Russia’s annexation of Crimea in 2014, which contributed to a 17% reduction in GDP.

However, it had returned to growth before the latest Russian military attack, according to the CIA World Factbook. Services accounted for around 60% of economic output in 2017, compared to 28.6% and 12.2% respectively for industry and agriculture.

IT services have exploded in Ukraine in recent years. A wide range of technology and professional services firms had expanded their presence or outsourced engineering business to Ukraine in recent years. IT exports exceeded $5 billion in 2020 for the first time, according to figures from Ukrainian Computer Associationa commercial organization.

Ring, an Amazon-owned tech company, drew particular attention after its former chief operating officer (and now a member of Ukraine’s parliament), Kira Rudik, took up arms in defense of her country.