The country’s economic reform programme focuses on immediate economic stability as well as broad and deep structural reforms. The aim is to provide a basis for strong and sustainable growth over the medium term.

But bold measures are necessary to achieve this and include keeping nominal wages and pensions fixed, while streamlining the tax system, the IMF said.

Nikolay Gueorguiev, IMF mission chief for Ukraine, said the programme had been developed by the Ukrainian government to address the many challenges oppressing the country’s economy.

The loan agreement forms part of a four-year economic reform programme, which was approved by the government and the IMF yesterday.

‘The budget is supported by revenue reforms, including increasing the progressivity of the personal income tax and streamlining the tax system,’ Gueorguiev said.

‘The authorities are committed to medium-term reforms of the civil service and the important health and education sectors, aiming to improve quality and efficiency, as well as widening the tax base and improving customs and tax administration. Fiscal consolidation would continue over the coming years which together with the debt operation envisaged by the authorities will strengthen debt sustainability.’

The government is also committed to implementing deep and decisive measures to reform the critical energy sector, according to the IMF.

Policies would also be geared towards returning inflation to single digits in 2016 within a flexible exchange rate regime.

Economic growth in the region contracted by around 7% to 7.5% in gross domestic product last year, anchored down by the conflict in Eastern Ukraine, which has slowed the industrial base and exports, damaged confidence and fuelled pressures on the financial system.