IMF approves $17bn aid deal for Ukraine
The Ukrainian currency has reached historic lows against this dollar this year.The International Monetary Fund has approved a two-year $17.1 billion loan package for Ukraine.
The loan comes amid heightened military and political tension between Ukraine and neighbouring Russia.
The loan is dependent on strict economic reforms, including raising taxes and energy prices.
The money will be released over two years, with the first instalment of $3.2bn available immediately.
The head of the IMF, Christine Lagarde, said the IMF would check regularly to ensure the Ukrainian government followed through on its commitments.
In March Ukraine put up gas prices by 50% in an effort to secure the bailout.
The government has also agreed to freeze the minimum wage.
The bailout had to be approved by the IMF\’s 24-member board, which includes a Russian representative.
The IMF loan will also unlock further funds worth $15bn from other donors, including the World Bank, EU, Canada and Japan.
Christine Lagarde, IMF managing director and chair, said: “Deep-seated vulnerabilities—together with political shocks—have led to a major crisis in Ukraine. The economy is in recession, fiscal balances have deteriorated, and the financial sector is under significant stress.
“Risks to the programme are high. In particular, further escalation of tensions with Russia and unrest in the east of the country pose a substantial risk to the economic outlook."
The international organisation has warned that the Ukraine economy faces a 5 percent contraction this year, even with the two-year loan deal.
Some of the initial disbursements could be turned around to pay off an outstanding $2.2bn bill for natural gas from Russia, which has threatened to cut off fuel supplies to its former Soviet republic, according to the AFP news agency.
The country already owes the IMF money under previous loan programmes. but the new loan could be used to repay off that.
The IMF has been wary about lending to Ukraine after two previous loan plans since 2008 failed because of the government\’s lack of adherence to reform conditions set by the global body.
Interim Prime Minister Arseniy Yatsenyuk has pledged to implement the reforms, including a fuel hike that is expected to rile Ukrainian consumers and stir widespread political controversy.
Ukraine, a country of 46 million residents, has been rocked by turmoil since the Russian parliament in March voted overwhelmingly to annex the Crimean peninsula. That move, widely condemned in the West, came after months of unrest in Kyiv and a push by separatists in Ukraine\’s Russian-speaking east to join Russia.
Source: Agencies
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