Tags: Ukraine | IMF

Ukraine Gets IMF Approval for $17 Billion Loan Amid Unrest

Wednesday, 30 Apr 2014 05:44 PM

The International Monetary Fund approved a $17-billion loan to Ukraine and an immediate disbursement of $3.2 billion to help the country pay its debts as separatist unrest threatens to split the nation’s east.

“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 Washington-based IMF said in an e-mailed statement today.

After twice freezing loans to Ukraine since 2008, the fund is banking on the interim government’s resolve to tackle unpopular measures such as the phasing out of natural-gas subsidies. The fund approval clears the way for additional aid from the European Union and the U.S. just as they widen sanctions against Russia for its actions in Ukraine.

Ukrainian Deputy Finance Minister Vitaliy Lisovenko in an interview last week said the loan will help turn around investors’ sentiment over its shrinking economy and may enable a return to international debt markets this year. The government has to meet $9 billion in foreign-currency debt payments due this year, he said.

Ukraine’s benchmark Eurobonds are heading for the biggest monthly slump since they were issued a year ago amid a deadly conflict between the government and pro-Russian separatists after President Vladimir Putin annexed Ukraine’s Crimea region last month.

In the worst confrontation with the U.S. and its European allies since the Cold War, Russia has started military exercises on Ukraine’s border, where the North Atlantic Treaty Organization says Putin is massing about 40,000 troops in battle readiness. The U.S. and EU say Russia hasn’t lived up to an accord signed April 17 in Geneva intended to defuse the situation.

In exchange for the loan, Ukraine plans to gradually cancel capital controls, a document obtained by Bloomberg shows. Even as Ukraine limited the amount of foreign currency individuals are allowed to buy, the hryvnia has lost 29 percent against the dollar this year, the most among more than 150 global currencies tracked by Bloomberg. The central bank halted its defense of the hryvnia so as not to burn through reserves.

The government plans to use $2 billion from the first disbursement to support the budget as it seeks to trim the fiscal gap to 8.5 percent of gross domestic product this year and 6.1 percent in 2015, according to the document. The shortfall includes subsidies to state-run energy company NAK Naftogaz Ukrainy.

Part of the IMF money will help Ukraine settle $2.2 billion in back payments to Russian state-controlled OAO Gazprom for natural gas and pay for future imports. Gazprom said it will ask Ukraine to pay $485 per 1,000 cubic meters in the second quarter, more than the European market price.

The Ukrainian government in recent weeks passed several measures to show its commitment to the program, including laws to improve state procurement transparency and to raise utility prices. The IMF has also consulted with major candidates in the May 25 presidential elections to gain their support and ensure the pace of change continues.

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The International Monetary Fund approved a $17-billion loan to Ukraine and an immediate disbursement of $3.2 billion to help the country pay its debts as separatist unrest threatens to split the nation’s east.
Ukraine, IMF
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2014-44-30
Wednesday, 30 Apr 2014 05:44 PM
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