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IMF promises Ukraine bailout of $14b to $18b

By Agencies in Kiev, Ukraine | China Daily | Updated: 2014-03-28 06:57

The International Monetary Fund has agreed a $14 billion to $18 billion two-year bailout for Ukraine, a deal to help it recover from months of turmoil that will also unlock further credits making a total of $27 billion.

The agreement, announced on Thursday, is intended to help the heavily indebted nation stabilize its economy after anti-government protests that resulted in the overthrow of president Viktor Yanukovych and a standoff with Moscow in which the Crimea region declared independence and joined Russia.

But the program of reforms that accompanies the support and which the IMF says is necessary to get the economy back on track and avoid a debt default may be painful for the population and the new government at a time of crisis and uncertainty.

The agreement in principle imposes tough economic conditions that will alter the lives of Ukrainians, who have grown accustomed to the comforts of Soviet-era subsidies and social welfare benefits, according to AFP.

"The mission has reached a staff-level agreement with the authorities of Ukraine on an economic reform program," the IMF said in a statement.

"The financial support from the broader international community that the program will unlock amounts to $27 billion over the next two years. Of this, assistance from the IMF will range between $14 billion to $18 billion, with the precise amount to be determined once all bilateral and multilateral support is accounted for."

Ukrainian acting prime minister Arseniy Yatsenyuk said Kiev must impose tough reforms and austerity. Otherwise, even with billions of dollars of aid, Ukraine will default in 2014, according to Russia Today.

"Our forecast predicts a 3 percent drop in GDP, provided we pass the stabilization package of laws the government proposes. If the laws are not passed, we forecast a default, and a 10 percent drop in GDP," Yatsenyuk told parliament on Thursday.

Ukraine will be short about $28 billion in 2014 due to a ballooning fiscal deficit. The country will also see inflation of 12 to 14 percent, depending on how much the national currency devalues, Yatsenyuk said. The government is not planning to raise minimum wages in response to inflation.

Yatsenyuk said the price of natural gas for Ukraine will make up $480 per 1,000 cubic meters from April 1, ITAR-Tass reported on Thursday.

Reuters - AFP

(China Daily 03/28/2014 page12)

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