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UPDATE: IMF Approves USD17 Billion Bailout For Ukraine

April 30, 2014

BRUSSELS (Alliance News) - The International Monetary Fund approved a USD17.01 billion economic package for Ukraine to restore macroeconomic stability amid heightened tensions in the region.

The Washington-based lender will make USD3.2 billion immediate payment to Ukraine. In exchange for the loan, Ukraine is committed to maintain flexible exchange rate, and meet near-term fiscal obligations.

The IMF loan will also unlock another USD15 billion funds, including loans and other funding from the US, Europe and the World Bank.

IMF Managing Director Christine Lagarde said the program faces both geopolitical and implementation risks.

In an interview, Reza Moghadam, Director of the IMF's European Department, said an overvalued exchange rate accompanied by loose fiscal policy and sizable losses in the state-owned gas company Naftogaz resulted in large twin deficits.

These vulnerabilities made the economy especially susceptible to economic and political shocks that eventually led to the current crisis, said Moghadam.

The program stipulates the nation to reduce its fiscal drain by eliminating Naftogaz's deficit by 2018 and to implement comprehensive structural reforms especially in areas of public procurement and tax administration.

Without measures, the combined deficit of the government and Naftogaz would have reached an impossible-to-finance 12% of GDP in 2014, undermining confidence in public finances, Moghadam noted.

Ukraine should also ensure that banks strengthen their balance sheets as necessary.

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Source: Alliance News

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