IMF approves $17 billion aid for Ukraine
The International Monetary Fund (IMF) approved on Wednesday a $17 billion aid deal for Ukraine, even as Kiev fights to prevent pro-Moscow separatists from hiving off another chunk of the country.
The IMF executive board’s green light opens the way for an immediate deployment of $3.2 billion to Kiev, which faces deep fiscal problems, compounding its political crisis.
Part of a $27 billion bailout including the World Bank, European Union and others, the IMF said the rescue plan “aims to restore macroeconomic stability, strengthen economic governance and transparency, and launch sound and sustainable economic growth, while protecting the most vulnerable”. The Fund has warned though that the Ukraine economy faces a 5.0 per cent contraction this year, even with the two-year loan programme.
Some of the initial disbursements could be turned around to pay off an outstanding $2.2 billion bill for natural gas from Russia, which has threatened to cut off fuel supplies to its former Soviet republic.
The package will open up loans from other donors totaling around $15 billion. The goal is for Ukraine to use the money to stabilize its economy.
“The authorities’ economic program supported by the Fund aims to restore macroeconomic stability, strengthen economic governance and transparency, and launch sound and sustainable economic growth, while protecting the most vulnerable,” the IMF said in a statement.
Ukraine's crisis was exacerbated after months of anti-government protests and Crimea's referendum to join Russia.
The country’s economy is forecasted to contract by three percent due to the chaos and lack of order, according to Ukrainian authorities. The nation’s output dropped 1.1 percent in the first quarter of 2014.
The ongoing protests, especially in the east of the country, are not helping the nation get its economy back on track. In fact, Ukraine's acting President Aleksandr Turchinov said on Wednesday that Kiev's government cannot control the situation in the east of the country, and called to speed up the creation of regional militias loyal to Kiev.
In return for the aid package, Ukraine promised to implement a number of reforms, including increasing gas prices by more than 50 percent for domestic households.
Earlier in April, Ukraine's finance minister, Oleksandr Shlapak, said that paying off debt to Russia would not be a top priority for Ukraine when it secured its first tranche of International Monetary (IMF) bailout cash.
Ukraine's total debt to Russia, including the $2.2 billion bill for gas, now stands at $16.6 billion, Prime Minister Dmitry Medvedev said.