UPDATE: IMF offers Ukraine loans worth up to 18 billion dollars
Moscow (Alliance News) – The International Monetary Fund (IMF) on Thursday offered Ukraine between 14 and 18 billion dollars in loans over two years to help the country avoid financial collapse after months of unrest that culminated in Russia’s annexation of Crimea.
Ukraine’s interim leaders, who came to power after three months of pro-EU protests that forced president Viktor Yanukovych to flee the country in late February, have already started discussing reforms aimed at stabilizing the economy.
Measures announced by Interim Prime Minister Arseniy Yatsenyuk on Thursday included axing 24,000 public sector jobs and special pensions for members of the judiciary and the military, as well as a 50% increase in gas prices, starting on May 1.
Without these reforms, Yatsenyuk said in Kyiv, the Ukrainian economy could shrink by 10% in the coming year. He acknowledged that his country is “on the brink of financial and economic bankruptcy.”
He also said that inflation could rise to 14% during 2014, and pledged to counter the rise in the cost of living for the vulnerable, including pensioners.
The IMF praised the planned reforms, but warned that the economy remained fragile.
“Following the intense economic and political turbulence of recent months, Ukraine has achieved some stability, but faces difficult challenges,” it said in a statement. The budget deficit is expected to reach 10% of gross domestic product this year.
“With significant external payments and limited access to international debt markets, international reserves fell to a critically low level of two months of import in early 2014,” the IMF said.
After a mission to Ukraine March 4-25, the IMF said the final aid figure would be set after consultations with Ukraine about its financial needs, adding that contributions from international lenders could bring the total aid package to 27 billion dollars.
“The goal of the authorities’ economic reform program is to restore macroeconomic stability and put the country on the path of sound governance and sustainable economic growth while protecting the vulnerable in the society,” the IMF said.
“The program will focus on reforms in the following key areas: monetary and exchange rate policies; the financial sector; fiscal policies; the energy sector; and governance, transparency, and the business climate.”
The US has offered Ukraine 1 billion dollars in energy aid, in the form of loan guarantees to protect the most vulnerable Ukrainians from lower energy subsidies after Russian gas monopoly, Gazprom, raised prices and demanded gas debt payments.
Ukraine is due to hold presidential elections on May 25, and former premier Yulia Tymoshenko announced her candidacy on Thursday.
Tymoshenko, who was freed from jail last month after more than two years on embezzlement and abuse of power charges, will seek confirmation from delegates at a congress of her Fatherland party on Saturday.
There has been speculation over whether Tymoshenko’s bid for the presidency could transform Ukraine by acting as a unifying force. Former boxing champion Vitali Klitschko and others also have claims to the presidency.
Tymoshenko’s freedom was one of the main demands the EU had for closer ties with Ukraine during years of negotiations that ended when Yanukovych ditched the talks in favour of stronger ties with Russia in November, sparking mass protests.
In other developments, President Vladmimir Putin said that Russia would develop its own credit card system to reduce reliance on Western firms and soften the blow from EU and US sanctions.
The measure is in response to restrictions placed on Russian banks by Western credit card companies, which are widely used in the country.
Visa and Mastercard last week stopped providing services for payment transactions for clients at a number of Russian banks.
Russian Prime Minister Dmitry Medvedev called on the country’s finance and economy ministries to put forward a plan for the economic integration of Crimea into the Russian Federation, adding that it should be implemented by April 15.
One option is to designate the peninsula as a “special zone” that would receive tax breaks and other subsidies in an attempt to revive its economy, Medvedev said.
He added that Russia planned to increase its military presence in Crimea in the coming years.
Copyright dpa
