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NEW YORK. — The International Monetary Fund has approved a US$17 billion aid deal for the beleaguered Ukrainian economy as Kiev’s armed forces went on “full combat alert”.
Pro-Kremlin insurgents tightened their grip on the increasingly chaotic east of the country, storming the regional police building and town hall in the city of Gorlivka, adding to more than a dozen locations already under their control.
IMF chief Christine Lagarde, speaking in Washington on Wednesday after her executive board approved the huge aid plan, said “urgent action was necessary”.
“Deep-seated vulnerabilities together with political shock have led to a major crisis in Ukraine,” she warned.
“The economy is in recession, fiscal balances have deteriorated, and the financial sector is under significant stress.”
Ukraine faces deep fiscal problems, and President Vladimir Putin has threatened to cut off vital gas supplies if a US$3.5-billion bill is not quickly paid.
The loan money will be released over two years, with a first tranche of US$3.2 billion available immediately.
The bailout had to be approved by the IMF’s 24-strong executive board, which includes a Russian representative.
Figures released on Wednesday showed the crisis was taking its toll on an already weak economy, with gross domestic product shrinking 2 percent in the first quarter compared with the last three months of 2013.
The IMF had been wary about lending to Ukraine after two previous loan plans failed because of the government’s failure to implement reforms that the new interim administration has now promised to carry out. — AFP.
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