Ukraine gets financial lifeline in return for 'very difficult' economic reforms

Now Reading:

Ukraine gets financial lifeline in return for 'very difficult' economic reforms

Text size Aa Aa

The International Monetary Fund is set to loan Ukraine 15.5 billion euros.

IMF chief Christine Lagarde said it is part of 35 billion euros in international emergency funding to stop the ex-Soviet republic going bankrupt after a year of political upheaval and war.

The money, including more than 3.5 billion euros from Brussels and Washington, will be dispersed over the next four years to help support economic reforms:

Lagarde said: “The Ukrainian authorities are demonstrating a determination and a courage to reform like we have never seen. They have, for instance, not only reached their targeted deficit for this year but they have exceeded the objective.”

In return for the help, Ukraine has agreed to quickly cut spending, put up energy prices, restructure the banks, reform state-owned firms and crack down on corruption.

The deal is part of the economic and ideological conflict between Moscow and the west.

But the fragile ceasefire in the east of the country has to hold for the IMF money and other loans to get final approval and be handed over – even Christine Lagarde admitted that.

“The main risk of course relates to the geopolitical developments that may affect market and investor confidence,” Lagarde said.

Ukrainian Prime Minister Arseniy Yatseniuk said the IMF aid package presupposes “very difficult” reforms to fight corruption, overhaul the energy sector, cut state expenditure and reduce state bureaucracy.

Yatseniuk added that the Ukrainian economy could grow in 2016 if “Russian aggression” is halted and internal reforms are a success.

The economy shrank 7.5 percent last year and the central bank forecasts it will fall another 5.0 percent this year.