Ukraine, IMF Agree USD 18 B Rescue Deal
Ukraine and the International Monetary Fund have signed a deal granting a USD 14-18 B package to the country, IMF mission's head Nikolay Gueorguiev has announced.
Under the new agreement, up to USD 27 B more could be allocated to Kiev over the next two years.
A statement by the leader of the IMF mission, Bulgarian Nikolay Gueorguiev, says that the exact amount of money that Ukraine is to receive will further be determined after taking into consideration the joint dimensions of all bilateral and international packages the country has been offered.
German newspaper Frankfurter Allegeine Zeitung informs that the deal was struck late on Wednesday, and a news conference of Ukraine's central bank was scheduled for Thursday, beginning 11:30 GMT, in which Gueorguiev is to take part.
The EU and the US have already promised additional 1 B grants, and Canada has decided to give USD 200 M to Kiev.
Earlier, it was reported that a deal could be struck as early as Thursday due to progress marked in the negotiations taking place in Kiev.
The so-called standby agreement would help authorities in Kiev fill gaps in the state budget and kick off economic reforms aimed at promoting stabilization and sustainable growth.
Standby agreements envisage financial assistance in return of comprehensive reforms in a given country.
In the case of Ukraine, overpriced currency hryvnia is one of the targets, as IMF experts believe its "unnatural" exchange rate has led to the current account deficit (roughly 9% of GDP) and the lack of competitiveness stalling exports and growth.
A controversial gas price hike was also on the agenda, but Kiev's leadership earlier agreed that a 50% hike on consumer and heating company bills will be in force starting May 1 this year. The country's situation could however be further complicated by expected increase of prices for gas supplied by Russia, which was announced by the country's energy giant Gazprom due to prolonged debts.
State gas subsidies have so far resulted in lower energy prices for Ukrainians, but had also led to a 2% add-up to the budget deficit caused by state energy entity Naftogaz's fiscal imbalances.
Re-structuring Naftogaz will also be necessary to improve efficiency and reduce its huge pressure on the central budget.
The IMF hopes to reduce Ukraine's deficit to 2.5 of GDP by 2016. Political reforms such as the creation of new laws on piblic procurement, transparency and business climate, as well as stepped-up efforts to fight corruption and tax evasion, are also to be carried out under the agreement.
IMF's mission led by Nikolay Gueorguiev arrived i Kiev on March 4 and has since held long talks with the new Ukrainian authorities.
The country's economy has recently been heading for a collapse, and Prime Minster Arseniy Yatsenyuk has repeatedly made calls for financial assistance.