- POSTED: 30 Aug 2014 01:08
- UPDATED: 30 Aug 2014 23:32
The IMF approved on Friday (Aug 29) the release of nearly US$1.4 billion in fresh funds for troubled Ukraine, as the country faces an escalation in fighting with pro-Russia separatists.
The International Monetary Fund (IMF) approved on Friday (Aug 29) the release of nearly US$1.4 billion (S$1.7 billion) in fresh funds for troubled Ukraine, as the country faces an escalation in fighting with pro-Russia separatists.
The Fund said Kiev had "generally" implemented economic reforms required under the support program launched in April, though it had missed targets for building up reserves and cutting the government's deficit. But it said that the urgent support program marshalled for the economy by the IMF, United States and Europe in April remains deeply at risk.
The program "continues to hinge crucially on the assumption that the conflict will subside in the coming months," it said.
IMF Managing Director Christine Lagarde applauded the progress made by the government that took over after February's overthrow of the pro-Russia president Viktor Yanukovych.
"However, the escalating conflict in the East and ongoing geopolitical tensions have weighed heavily on the economy and society, causing a deeper recession and deviations from program targets in the short term," she said in a statement.
And while the government remains committed to closing its deficit, improving the climate for business, and fighting corruption, she said that risks to the program "remain high".
"The program success hinges on a timely resolution of the conflict in the East, as well as on the authorities' strong policy performance and adherence to the planned reforms," she said.
It was the second release of funds from the IMF's program to help stabilize the economy and its currency, the hryvnia, battered by years of mismanagement and deep corruption and more recently by Russia's seizure of Crimea and troubles with rebels in the country's east. Ukraine's economy has contracted for nearly two years and continued to shrink in the April-June quarter.
In April the IMF approved a US$17 billion line of credit to Ukraine, part of a US$27 billion international rescue of the economy, but the first releases of funds have yet to stabilize the hryvnia. The currency, which traded at just over eight hryvnia to one US dollar late last year, fell to almost 14 this week.
The IMF has warned the economy could contract 6.5 per cent this year, and in July, Lagarde said the support marshalled by the international community might not be adequate to shore up Kiev's finances.
Prime Minister Arseniy Yatsenyuk via Twitter welcomed the new funds Friday as "a welcome sign of support and confidence."
Earlier he called the economic situation "very difficult and very complicated, (as) the country is at war."