Saturday, August 02, 2014


Ukraine

IMF Agrees On $14-18 Billion Bailout Package For Ukraine

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By RFE/RL
The International Monetary Fund (IMF) has promised to loan of between $14 billion and $18 billion to cash-strapped Ukraine.

After two weeks of talks in Kyiv, the IMF said in statement on March 27 that it had reached "a staff-level agreement with the authorities of Ukraine on an economic reform program that can be supported by a two-year Stand-By Arrangement with the IMF."

It said the precise amount would be determined "once all bilateral and multilateral support is accounted for."

The loan will help prop up Ukraine's struggling economy, further weakened lately by three months of antigovernment protests and the subsequent annexation of its Crimean Peninsula by Russia.

Prime Minister Arseniy Yatsenyuk said soon after the IMF announcement that Ukraine's treasury was nearly empty.

"In 2014, the country lacks 289 billion hryvnya [$26 billion], which is almost the amount of the entire state budget for the current year," he said.

The IMF said Ukraine "has achieved some stability" following the "intense economic and political turbulence of recent months" but said it still faced "difficult challenges." 

The loan, which hinges on structural reforms that Ukraine has pledged to undertake, will unlock further credits to reach a total of $27 billion in international support over the next two years.

It is subject to approval by the IMF's Executive Board, expected to come in April.

In Washington, the White House welcomed the agreement as "a powerful sign of support from the international community for the Ukrainian government."

Yatsenyuk said Ukraine's gross domestic product (GDP) could fall dramatically without the IMF loan.

"If these laws [needed to meet IMF loan conditions] are not accepted, we predict a default and a 10 percent decrease in the GDP," he said.

Speaking in parliament, he said inflation this year would be between 12 and 14 percent.

Ukraine's confrontation with Moscow over Crimea is likely to deal a further blow to its economy.

"We [also] predict that the Russian Federation will be reducing the scope of bilateral trade during the current year," Yatsenyuk said. "It may have an additional negative effect of minus 1 percent from the GDP growth."

Yatsenyuk said the price Ukraine paid for Russian gas supplies would rise 79 percent from April 1 -- to $480 per 1,000 cubic meters.

"The first risk is the so-called energy problem," Yatsenyuk said. "Raising the price for gas twofold will lead to very difficult consequences for the entire Ukrainian economy and Ukrainian population. That's the price for Ukrainian independence -- a twofold hike in prices for Russian energy."

The Ukrainian government on March 26 said it had agreed to raise the price of gas to the domestic consumer by more than 50 percent starting on May 1. The price hike was a long-standing demand made by the IMF and one that President Viktor Yanukovych had refused to make before his ouster in February.

Moscow claims Kyiv also owes it more than $10 billion for gas deliveries.

According to Yatsenyuk, "Ukraine is on the edge of economic and financial bankruptcy."
 
With reporting by Reuters, AP, AFP, and RFE/RL

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