IMF to maintain Ukraine aid following “constructive” talks

11 Feb 16

Ukraine looks to have secured the continuation of its $17.5bn bailout from the International Monetary Fund after “constructive” discussions with managing director Christine Lagarde.

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Independence Square in Kiev, Ukraine
Independence Square in Kiev, Ukraine

 

Lagarde warned yesterday that the IMF could withdraw its crucial budget support to Ukraine’s struggling economy after reforms stalled amid political squabbles and the resignation of the economic minister, who left office accusing the government of high-level corruption.

But later on yesterday Lagarde announced she had had a “constructive discussion” with Ukrainian president Petro Poroshenko on the issues she had raised earlier.

“The president reassured me of his unwavering commitment to reforms, including governance and fighting corruption,” she said.

“We agreed on the principle of a roadmap of actions and priority measures to ensure prompt progress under the programme, which will help keep Ukraine on a path toward robust and sustainable growth.”

The fund had been withholding the next tranche of its billion dollar bailout while awaiting the implementation of agreed reforms, including cuts to Ukraine’s pension system and stronger anti-corruption efforts.

But yesterday she cautioned that without a substantial new effort to invigorate the promised reforms, whose implementation had so far been slow and patchy, “it is hard to see how the IMF-supported programme can continue and be successful”.

The pro-western, coalition government in Ukraine is plagued by infighting and, according to former economic minister Aivaras Abromavičus, corruption. His resignatoin last week highlighted the political turmoil within government, and he stated he had no “desire to serve as a cover-up for covert corruption”.

The Ukrainian government has already survived one vote of no confidence, and looks set to face another one sometime this month.

On Monday, Ukraine’s finance minister Natalia Yaresko said the IMF would not give any more aid until it is clear that, in the event of a government collapse, the next administration would follow through on agreed reforms.

The IMF has warned to disruptions of its bailout programme before, after the Ukrainian parliament voted against the government’s IMF-backed budget in December.

Ukraine relies on money from the IMF, the US, the UK and the European Union to keep its economy afloat after it contracted by more than 10% last year following the ousting of pro-Russian president Viktor Yanukovych in 2014. 

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