On Thursday the International Monetary Fund said it would provide a new four-year $17.5bn bailout for Ukraine that is expected to lead to a restructuring of Kiev’s privately-held debts so that it can shore up its public finances, Financial Times reports.
The new bailout was announced early Thursday morning, just before Ukraine reached a ceasefire agreement with Russian-backed separatists after an all-night meeting in Minsk between president Petro Poroshenko, Russia’s Vladimir Putin, Germany’s Angela Merkel and François Hollande.
The ceasefire is to take place from midnight on Saturday, according to Mr Putin.
The new bailout plan comes instead of a $17bn programme launched less than a year ago but abandoned when the conflict with Russian-backed separatists in Ukraine’s eastern districts deepened, undermining the country’s public finances. The IMF had distributed $4.5bn in the first programme, bringing the fund’s total commitment to Ukraine to $22bn.
The IMF’s chief Christine Lagarde called the programme “realistic”, saying: “It’s an ambitious plan but not without risk.” She added, “Why is this different this time? Clearly, the Ukrainian authorities are demonstrating courage to reform we’ve never seen before.”
However, Tim Ash, emerging markets analyst at Standard Bank, disputed Ms Lagarde’s characterisation of the package. “This is not a significantly increased IMF programme, and Lagarde should not try to sell it as such.”
According to Ash, after stripping out the undisbursed money from the existing bailout, the
new one includes only $5.8bn in additional funds from the IMF, adding that the fund was reluctant to commit significant funds due to the escalated conflict between Ukraine and Russia.
In December the monetary fund told member countries that a $15bn gap had opened up in Kiev’s finances since the programme began. Earlier in February, Kiev said its foreign currency reserves had diminished to just $5.4bn, down from $16.3bn in May. At the same time, the IMF did not say how much of a haircut Ukrainian bondholders would have to take in order to meet its revised assumptions under the new rescue programme. Such restructuring will be negotiated between Kiev and its creditors.
