IMF approves $17.5 billion loan program for Ukraine

The International Monetary Fund’s board signed off on a $17.5 billion four-year aid program for Ukraine on Wednesday, the second attempt in less than a year to pull the country’s economy back from the brink of bankruptcy.

The program includes an immediate payment of $5 billion for general budget support to help stabilize Ukraine’s listingeconomy.

The IMF is expected to release details of the program as soon as today.

In a statement IMF Managing Director Christine Lagarde said the aim was to provide “immediate economic stabilization” to a country beset by conflict.

“The program is ambitious and involves risks, notably those stemming from the conflict” with Russia, Lagarde said. “With continued firm implementation, there is reasonably strong prospect of success.”

The IMF loan is expected to unlock further credits from other donors. Ukraine will also pursue debt restructuring talks with existing bondholders.

The combined package of assistance is estimated at $40 billion, the IMF has said.

Prime Minister Arseny Yatseniuk in a televised statement said the IMF program would letUkraine tap $7.5 billion in other loans. Another $15.4 billion is expected in debt relief according to sources familiar with the IMF program.

The money “will enable us to stabilize the economy and the financial sector. It will be used to stabilize the currency. It will enable the Ukrainian economy to grow from 2016,” Yatseniuk said.

The IMF last year already approved a $17 billion, two-year loan to Ukraine, but deemed the funds and agreed program duration insufficient to support economic reforms while the government continued to battle pro-Russia separatists in eastern Ukraine.

Pro-Russian rebels and the government agreed to a peace deal in Minsk last month, but both sides continue to accuse each other of violations.

The unrest in the east follows months of upheaval from anti-government protests and Russia’s subsequent annexation of the Crimea region.

Lagarde last week said an infusion of financial support for Ukraine and its success largely hinges on the stability of eastern Ukraine and how the security crisis is resolved.

After a year of political upheaval and war, Ukraine’s economy is in a tailspin with a currency that just pulled back from record lows, the highest interest rates in 15 years, and central bank reserves of just $6.4 billion, barely enough to cover five weeks of imports.

Ukraine’s parliament last week approved a raft of IMF-backed amendments to its 2015 draft budget which were key preconditions for IMF approval of the bailout.

The fund complimented those steps, including the willingness of Ukraine officials to let the currency float.

“They have maintained fiscal discipline in very difficult conditions,” Lagarde said in a release.

Reuters