IMF approves Ukraine's $17bn bailout, warning of risks

12:00 • 02.05.14
Economy

Ukraine is at risk of a prolonged recession and may need an extension of its $17bn bailout should tensions with Russia and unrest in the east of the country escalate, the International Monetary Fund (IMF) has warned.


The IMF approved the emergency funding package after Kiev agreed to a sweeping economic reform programme designed to reduce the deficit and promote greater financial stability, The Guardian reported.


The Washington-based fund expects Ukraine's troubled economy to shrink by 5% in 2014 amid weak investor and consumer confidence, before partially rebounding in 2015 with 2% growth.


However, the IMF conceded there were significant risks to the outlook, not least because of the strong trade and gas ties between Ukraine and Russia.


Announcing the approval of the bailout, which will be released in tranches, the IMF's managing director, Christine Lagarde, outlined the scale of the challenge ahead.


"Deep-seated vulnerabilities – together with political shocks – have led to a major crisis in Ukraine," she said. "The economy is in recession, fiscal balances have deteriorated and the financial sector is under significant stress.


"Risks to the [reform] programme are high. In particular, further escalation of tensions with Russia and unrest in the east of the country pose a substantial risk to the economic outlook."


An IMF staff report published on Thursday stresses that an "unwavering commitment" from Kiev and broad public support are critical to the success of the programme, which includes energy market reforms, spending cuts and tax rises in an attempt to put the economy on a more stable footing. 


Read more here.

 

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