RT | April 30, 2014
The International Monetary Fund has approved a two-year $17.1 billion loan package for Ukraine. The immediate disbursement of $3.2 billion will allow Ukraine to avoid a potential debt default.
The IMF’s 24-member board agreed to the two-year program to aid Ukraine’s troubled economy on Wednesday.
The approval gives the green light for the immediate release of $3.2 billion to Ukraine, which will allow the nation not to fall into default, Reuters reports. More than half of that money will be dedicated to supporting the country’s budget.
The package will open up loans from other donors totaling around $15 billion. The goal is for Ukraine to use the money to stabilize its economy.
“The authorities’ economic program supported by the Fund aims to restore macroeconomic stability, strengthen economic governance and transparency, and launch sound and sustainable economic growth, while protecting the most vulnerable,” the IMF said in a statement.
IMF managing director Christine Lagarde commented on the aid package, stating that the plan may come with geopolitical and implementation risks.
“On the implementation front, we are taking all the precautions we can in order to mitigate those risks,” Lagarde told reporters on Wednesday. “On the geopolitical front, clearly the bilateral international support, and the cooperation of all parties, will be extremely helpful to reinforce the position of the economy of Ukraine.”
“We believe that Ukraine has an opportunity to seize the moment, to break away from previous practices, both from the fiscal, from the monetary, and from the governance point of view,” Lagarde added.
Ukraine’s crisis was exacerbated after months of anti-government protests and Crimea’s referendum to join Russia.
The country’s economy is forecast to contract by three percent due to the chaos and lack of order, according to Ukrainian authorities. The nation’s output dropped 1.1 percent in the first quarter of 2014.
The ongoing protests, especially in the east of the country, are not helping the nation get its economy back on track. In fact, Ukraine’s acting President Aleksandr Turchinov said on Wednesday that Kiev’s government cannot control the situation in the east of the country, and called to speed up the creation of regional militias loyal to Kiev.
In return for the aid package, Ukraine promised to implement a number of reforms, including increasing gas prices by more than 50 percent for domestic households.
Earlier in April, Ukraine’s finance minister, Oleksandr Shlapak, said that paying off debt to Russia would not be a top priority for Ukraine when it secured its first tranche of International Monetary (IMF) bailout cash.
Ukraine’s total debt to Russia, including the $2.2 billion bill for gas, now stands at $16.6 billion, Prime Minister Dmitry Medvedev said.