The head of the IMF, Christine Lagarde, told reporters in Brussels that the organisation had reached a staff-level agreement with the Ukrainian government on a new four-year economic reform programme and a $17.5bn loan.
The deal replaces another $17bn loan programme announced by the IMF in April, of which $4.5bn was distributed, meaning the IMF’s total financing will be $22bn.
“It is an ambitious programme, it is a tough programme and it is not without risk,” Lagarde said. “But it is also a realistic programme and its effective implementation, after consideration and approval by our executive board, can represent a turning point for Ukraine.”
In exchange for the sorely needed cash, Kiev will have to cut spending, restructure its banks and take further measures to fight corruption. Slashing expenditure on social services and other benefits is certain to be an unpopular move with the public, whose resources are already stretched.
State workers at Ukraine’s major rocket engine-maker Yuzhmash have been on strike this week after seven months without pay.
Ukraine’s economy, which has been in crisis for years, has been struck a huge blow by the conflict in the east, which costs Kiev $8m a day, according to the country’s president, Petro Poroshenko.
The hryvnia lost half of its value in just two days this month after the government announced it would stop propping up the currency, and foreign currency reserves have dwindled to $6.42bn.
The country’s economy shrank by 7.5% last year in the most “difficult year since at least the second world war,” the head of the central bank said at the end of December.
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