Ukraine economy ‘to shrink by 9% in 2015’

1 Jun 15

The Ukraine conflict took a heavier than expected toll on the country's economy in the first quarter of 2015, which is now expected to shrink by 9% this year, the International Monetary Fund has warned.

Concluding a two-and-a-half week mission to Kyiv to discuss the authorities’ economic reform programme, the IMF said inflation is expected to rise to 46% by the end of the year. The troubled country is still affected by the conflict in its eastern territory.

But the fund acknowledged that the beleaguered country’s ‘commitment to the reform programme remains strong’.

Following the visit to Kyiv, Nikolay Gueorguiev, mission chief for Ukraine, said ‘constructive’ discussions were held with the authorities and ‘understandings were reached on most issues’.

‘All performance criteria for end-March were met and all structural benchmarks due in the spring are on course to be met, albeit some with a delay,’ he said.

‘This good programme implementation has been achieved notwithstanding an exceptionally difficult environment, in part related to the unresolved conflict in the East, which took a heavier than expected toll on the economy in the first quarter of 2015.’

He added that Ukraine’s gross international reserves had increased to $9.6bn at the end-April and the domestic currency has been recovering.

The IMF’s economic reform programme known as the Extended Fund Facility Arrangement focuses on immediate economic stability as well as broad and deep structural reforms. The aim is to provide a basis for strong and sustainable growth over the medium term.

Ukraine is in deep recession and is experiencing sharp exchange rate depreciation aggravated by weakened balance sheets and increased public debt.

In March, the IMF agreed a four-year $17.5bn loan programme for cash-strapped Ukraine, which included an immediate $5bn disbursement to strengthen public finances and put the economy on the path to recovery.

But the IMF said further disbursements would be based on a standard quarterly review and performance criteria.

Gueorguiev said: ‘Discussions will continue in the comings days to finalise a staff-level agreement than can be taken for approval to the IMF management and the executive board.’

  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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