The International Monetary Fund and conflict-torn Ukraine have reached a preliminary deal on a new financial rescue plan worth USD 17.5 billion that could be a “turning point” for Kiev, IMF chief Christine Lagarde said today.
In total, Ukraine will receive USD40 billion in assistance over four years coupled with bilateral loans from other sources, Lagarde said, helping to stabilise Kiev’s finances after 10 months of conflict in the east.
Talks have been under way in Kiev for days to reach an agreement on Ukraine’s fourth IMF bailout in 10 years, with the last package in April 2014 failing to stave off financial crisis in the former Soviet republic.
“I am pleased to announce that the IMF team working in Kiev has concluded a staff-level agreement with the Ukrainian government on a new economic reform programme that would be supported by an extended fund facility of about USD 17.5 billion from the IMF,” Lagarde told a news conference in Brussels.
The deal came as leaders meeting at marathon peace talks in Minsk announced a ceasefire aimed at halting the conflict.
Ukrainian Prime Minister Arseniy Yatsenyuk said Kiev was committed to the reforms demanded by the IMF.
“We anticipate, if the programme succeeds and Russian aggression stops, that the Ukrainian economy will start to grow in 2016,” he told reporters.
“This four-year programme shows that Ukraine will stick during that time to the vital reforms necessary to stabilise the country’s finances.”
Ukraine’s economy is in turmoil, with its currency the hryvnia losing 50 per cent of its value in 2014 and the economy shrinking 7.5 per cent, with another contraction of 5.0 per cent expected this year.
Russia had agreed to provide a massive USD 15 billion bailout loan to Ukraine in December 2013, before pro-Moscow president Viktor Yanukovych was toppled, setting off the current crisis. Russia froze the loan after the first USD 3 billion instalment.
Lagarde said the new arrangement would support “bold policy reforms” by Kiev, which is under pressure from Western governments and creditors to root out endemic corruption and overhaul its finances, even as it battles the rebels.
“It is an ambitious programme, it is a tough programme, and it is not without risk,” Lagarde said.
“But it is also a realistic programme and its effective implementation, after consideration and approval by our executive board, can represent a turning point for Ukraine.”
Lagarde, speaking shortly before news came of the breakthrough at the Minsk talks, said she hoped for an end to the fighting.