IMF approves ‘ambitious’ loan programme for Ukraine

8 Apr 15

The International Monetary Fund yesterday approved an ‘ambitious’ $17.5bn loan programme for Ukraine, including an immediate $5bn disbursement to strengthen public finances and put the economy on the path to recovery.

The approval of the four-year loan under the IMF’s Extended Fund Facility enables the immediate disbursement of $5bn, of which about $2.7bn is being allocated to budget support.

The IMF said further disbursements would be based on a standard quarterly review and performance criteria.

Ukraine is in deep recession and is experiencing sharp exchange rate depreciation aggravated by weakened balance sheets and increased public debt. The beleaguered country is still affected by the conflict in its eastern territory, the IMF said.

IMF managing director Christine Lagarde said the loan would support immediate economic stabilisation and fund a set of deep and wide-ranging policy reforms.

‘The programme is ambitious and involves risks, notably those stemming from the conflict in the east of the country,’ she said.

‘I am heartened that the ceasefire agreed last month in Minsk seems to be largely holding for now, and hope that a further loss of life can be avoided.’

Lagarde said reforms were aimed at restoring robust growth over the medium term and improving living standards for the Ukrainian people.

‘The Ukrainian authorities continue to demonstrate a strong commitment to reform. They have maintained fiscal discipline in very difficult conditions; allowed the exchange rate to adjust; and have increased retail end-user prices for gas,’ she said.

‘Many key measures are front-loaded under the new programme – including further sizable energy tariff increases; bank restructuring; governance reforms of state-owned enterprises; and legal changes aimed at combating corruption and strengthening the rule of law.’

She also said measures would be taken to strengthen and better target the social safety net to help cushion the impact of adjustment for the poor in society.

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

The government is committed widening the tax base and improving customs and tax administration and reforming its health and education and sectors. Earlier this week, Ukraine borrowed $215m from the World Bank to support the implementation of its healthcare reform.

  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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