Seeking to plug a 15 billion dollar funding gap, Ukraine has said it will begin crucial talks with its creditors on how to restructure the conflict-torn country’s debt on Friday.
The move comes as part of the high-stakes IMF loan deal struck on Wednesday which promises up to 17.5 billion euros over the next four years.
The IMF stipulates that talks must end by June in order to access a 5 billion dollar tranche from the fund. The government has already acted to initiate various cost cutting reforms in order to receive the first 5 billion euros by the end of the week.
The Prime Minister said that all decisions taken by the government were supported by Parliament and signed off by the President as well as their western partners.
The decisions included pension reforms, gas price hikes and amendments to the 2015 state budget.
With an economy in dire straits the money is needed to keep the country afloat, but most of the loan will be heading straight out the door, as this analyst explains.
“Ukraine will receive 10 billion dollars which will protect us from default in 2015. The IMF money cannot be used for any other costs in local currency, such as social benefits, defence. The loan deal is only there to cover the government’s external obligations in foreign currency.”
The economy is reeling from a year of political upheaval. Central bank reserves have barely enough to cover five weeks of imports. With the credit life line the IMF predicts the the economy will grow two percent in 2016, that is if the fragile ceasefire holds in the east.
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