Ukraine gets $17.5bn bailout deal from IMF

IMF Headquarters in Washington DC
[PHOTO: Javier Ignacio Acuña Ditzel/Flickr/CC BY 2.0]

Brussels: Ukrainian Prime Minister Arseniy Yatsenyuk says a new multibillion-dollar aid package from the International Monetary Fund (IMF) requires "very difficult" reforms to fight corruption, overhaul the energy sector, cut spending, and reduce bureaucracy.

But Yatsenyuk said Kyiv was committed to the reforms demanded by the IMF in the agreement.

His statement comes after IMF chief Christine Lagarde announced on February 12 that the IMF and Ukraine had reached a preliminary deal on a financial rescue plan worth $17.5 billion, part of an larger four-year, $40 billion funding package for the conflict-torn country in return for "bold policy reforms" by Kyiv.

The deal still must be approved by the IMF's board of directors.

Lagarde said Ukraine had agreed to front-load reforms, including energy-tariff increases, bank restructuring, governance reform of state-owned enterprises, and an anticorruption agenda.

Lagarde said that it was "an ambitious program; it is a tough program; and it is not without risk."

"But it is also a realistic program and its effective implementation...can represent a turning point for Ukraine," she said.

The IMF chief added that "this new program offers an important opportunity for Ukraine to move its economy forward at a critical moment in the country's history."

Ukraine is on the brink of bankruptcy after a year of political upheaval and war.

Ukraine's currency, the hryvnya, lost 50 percent of its value in 2014 and the economy shrank 7.5 percent, with another contraction of 5 percent expected this year.

Kyiv is under pressure by the West to fight corruption and overhaul its finances, even as it battles pro-Russian separatist rebels in the east of the country.

Yatsenyuk, however, said the Ukrainian economy could grow in 2016 if what he described as "Russian aggression" was halted and internal reforms were a success.

Lagarde also offered optimism for Ukraine, saying that Kyiv's government had early in its reforms "not only reached [its] targeted deficit for this year but they have exceeded the objective and produced a better result than was expected."

The IMF agreement comes as a new cease-fire deal was agreed in marathon talks in Minsk attended by the leaders of Ukraine, Russia, Germany, and France that focused on ending the fighting between government forces and separatists in eastern Ukraine that has killed more than 5,350 people in 10 months.