Financial News

  • 28 March 2014, 11:11

Ukraine Crisis: IMF Agrees $18bn Bailout Fund

The International Monetary Fund has agreed rescue funds of up to $18bn (£10.8bn) for Ukraine in return for strict economic reforms.

Under the conditions of the proposed deal, Ukraine's interim government announced a 50% increase in the price of domestic gas from May 1.

The IMF has pushed for a cut in energy subsidies which accounted for 7.5% of Ukraine's GDP in 2012.

Ukraine has said it needs the bailout to avoid a possible debt default.

The so-called Stand-By Arrangement (SBA) with the IMF will not be ratified until the executive board meets next month.

If it is agreed, it could open Ukraine up to further financial support from the US, EU and Japan amounting to a total of $27bn (£16.3bn) over the next two years.

Ukrainian Prime Minister Arseniy Yatsenyuk said on Thursday the price for Russian gas could reach $480 (£290) per 1,000 cubic metres from April 1. The current level is $268.5 (£162).

He added that if the reforms required by the IMF were not adopted, GDP could fall 10% in 2014 and the economy could default.

The country's finance minister had predicted Ukraine's economy will contract 3% this year after years of mismanagement and political turmoil.

A statement from the IMF said: "Following the intense economic and political turbulence of recent months, Ukraine has achieved some stability, but faces difficult challenges.

"The mission has reached a staff-level agreement with the authorities of Ukraine on an economic reform programme that can be supported by a two-year Stand-By Agreement (SBA) with the IMF.

"The financial support from the broader international community that the programme will unlock amounts to $27bn over the next two years.

"Of this, assistance from the IMF will range between $14-18bn, with the precise amount to be determined once all bilateral and multilateral support is accounted for."

The agreement will help Ukraine to meet debt payments after months of anti-government protests which saw President Viktor Yanukovych flee the country and Russian troops enter the Crimea region.

Meanwhile, former Ukrainian prime minister Yulia Tymoshenko has said she will stand in presidential elections in May.

The 53-year-old was released from jail last month following the fall of Mr Yanukovych's government.

She had spent three years in prison after being convicted of embezzlement and abuse of power, charges her supporters say were politically motivated.

Ms Tymoshenko, a heroine of the 2004 Orange Revolution which overthrew Mr Yanukovych during his first term, is a divisive figure in Ukraine, seen variously as a fearless standard bearer of democracy and a self-interested oligarch.

Advertisement