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Lagarde: Ukraine, IMF in Deal for $17.5 bn Bailout

The International Monetary Fund and conflict-torn Ukraine have reached a preliminary deal on a new financial rescue plan worth $17.5 billion that could be a "turning point" for Kiev, IMF chief Christine Lagarde said Thursday.

In total, Ukraine will receive $40 billion (35 billion euros) in assistance over four years coupled with bilateral loans from other sources, Lagarde said, helping to stabilize 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 program that would be supported by an extended fund facility of about $17.5 billion from the IMF," Lagarde told a news conference in Brussels.

The announcement came as leaders meeting at at marathon peace talks in Minsk announced a ceasefire deal 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 program succeeds and Russian aggression stops, that the Ukrainian economy will start to grow in 2016," he told reporters.

"This four-year program shows that Ukraine will stick during that time to the vital reforms necessary to stabilize the country's finances."

 

- Ukraine economy struggling - 

Ukraine's economy is in turmoil, with its currency the hryvnia losing 50 percent of its value in 2014 and the economy shrinking 7.5 percent, with another contraction of 5.0 percent expected this year.

Russia had agreed to provide a massive $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 $3 billion installment.

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 program, it is a tough program, and it is not without risk," Lagarde said.

"But it is also a realistic program 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.

"Of course, resolution of the conflict, so critical for people, would also strengthen and speed up prospects for macroeconomic stabilization and growth," she said.

Source: Agence France Presse


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