Ukraine to get IMF bailout in return for economic reforms

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Ukraine to get IMF bailout in return for economic reforms

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Financial help is on its way to Ukraine with the International Monetary Fund agreeing on a $17billion (12.26 billion euro) bailout.

The money will be released over two years with the first installment of $3.2 billion (2.3 billion euros) to be made available immediately. Ukraine desperately needs to increase revenues to try to meet its foreign currency debt obligations.

IMF chief Christine Lagarde admitted it was a gamble relying on the country’s government being able to carry out unpopular measures to get its finances in order.

“It’s a programme that has implementation risks. It’s one where we are trying to mitigate the risks as much as we can. We have had prior actions which have been addressed satisfactorily,” she said.

One of those risks concerns the unity or otherwise of Ukraine.

On Thursday the International Monetary Fund warned that if Ukraine lost territory in the east it would have to redesign the $17 billion bailout, which would probably require additional financing.

Interim Prime Minister Arseniy Yatsenyuk has threatened a cabinet reshuffle if order is not restored in the east.

He has also called for a national poll on “territorial integrity” (national unity) to be held at the same time as the May 25 election.

Outside the cabinet office in Kyiv there was a small protest by demonstrators complaining about the government’s infighting and ineffectiveness in dealing with the country’s beleaguered economy.

Below is a calculation of what Ukraine needs to pay and what it expects to receive in credits this year

Ukraine owes

$2.9 billion to the IMF – due over the course of the year

$1 billion on Eurobonds in June; $0.9 billion in coupon payments

$0.9 billion due to other international financial organisations/countries

$1.3 billion repayment of local dollar bonds

$1.6 billion early repayment of local dollar bonds

$0.5 billion local bond coupon payments and T-bills

Ukraine expects

$3 billion from the IMF next week

$2.7 billion from the European Union – expects up to $1billion this month

$1 billion from World Bank

$1 billion guarantee from the United States

$1 billion Eurobond issue – possibly in the second half of the year

$0.3 billion from local dollar bond placement

The figures include both Finance Ministry and Central Bank obligations, but do not include debts owed by state companies such as Naftogaz, which according to Russia’s Gazprom now owes $3.5 billion for gas imports from Moscow.