Ukraine requests fresh IMF bailout

22nd January 2015, Comments 0 comments

Ukraine has asked the IMF for a new and broader rescue package, and will seek to renegotiate its debt with bond holders, officials said on Wednesday as the war-torn country fights to save its reeling economy.

IMF chief Christine Lagarde met Ukrainian Petro Poroshenko on the sidelines of the World Economic Forum in Davos and said Ukraine requested that the Washington-based IMF deepen its relationship with Kiev.

The meeting took place soon after Poroshenko told an audience of the world's financial elite in Davos that 9,000 Russian troops were backing Ukrainian separatist fighters.

"President Poroshenko informed me today that the Ukrainian authorities have requested a multi-year arrangement with the Fund... to replace the existing... arrangement," the IMF said in a statement.

"We will consult with the IMF Executive Board on the authorities' request," Lagarde said.

The IMF, which last year granted Kiev $17 billion (around 14 billion euros at the time) in financial aid over two years as part of a broader $27 billion global rescue package, has expressed fears that the former Soviet country may need an additional $15 billion in immediate aid.

The Ukrainian government said the request was key to turning around the war-torn economy, which shrank 7.5 percent in 2014 and is projected to contract by another 5 percentage points this year.

Ukraine's reserves more than halved in 2014 and dipped to less than $10 billion for the first time in five years as the authorities sought to prop up the hryvnia and fund their eight-month campaign against pro-Russian separatists in the industrial east.

- 'Extraordinarily committed' -

The new IMF programme "will allow us to gain access to additional resources, which in turn will enable us to return to economic growth, restore adequate foreign exchange reserves, and ensure economic and financial stability going forward," said Ukrainian Finance Minister Natalie Jaresko.

Kiev added that as part of an effort to stabilise its finances, it will "consult with the holders of Ukrainian international sovereign debt so as to improve Ukraine's medium term sustainability".

Asked for details on the debt restructuring, Jaresko told AFP that "there's no perimeter to discuss" until the IMF talks are over.

"When we finish our discussion with the IMF agreement, then I would expect the next step to be these consultations -- we would be listening to and talking with our sovereign creditors to talk about how we can improve the debt sustainability of the country," she said.

She added that the IMF is expected to conclude its mission on January 29 and "so shortly after that .. we will reach out to our creditors for these consultations".

Ukraine's foreign lenders, which besides the IMF include the European Union, World Bank and Japan, want deep cuts to welfare services and a hike in energy prices to help balance the books.

The architects of the aid package had hoped to use it as an incentive for Ukraine to wean itself off communist-era subsidies long abandoned by its smaller but now far better-off neighbours in eastern Europe.

The IMF also wants to see loss-making state firms privatised and graft that has permeated both ministries and local governments comprehensively punished instead of having their wrongdoings swept under the rug.

But few of those steps have yet been taken.

Jaresko however signalled Kiev's commitment to meeting these reforms.

"Our partners understand the critical situation we find ourselves in and are also committed to us the way we are committed to the reform.

"They recognise that they are backing a government, they are looking to back a government that is perhaps for the first time in Ukraine's history extraordinarily committed, prepared and not just talking but doing the reforms that are necessary," she said.


© 2015 AFP

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