KYIV, Oct 29 – The top U.S. official for Ukraine negotiations praised the country for reaching an agreement with the Internat onal Monetary Fund, adding the deal has helped to avert an economic disaster.
Kurt Volker, U.S. Special Representative for Ukraine Negotiations, said the government will now be able to focus on reforms as the IMF’s $3.9 billion loan will support the budget, Interfax-Ukraine reported.
Without the agreement, Ukraine would have felt the serious negative economic impact as soon as in January through February 2019, Volker said.
The comment underscores Washington’s support for the agreement, which is yet to be approved by the IMF’s board. The US is the key stakeholder in the IMF.
Volker’s comment comes days after Prime Minister Volodymyr Groysman admitted that the IMF loan deal has helped Ukraine to prevent “extremely difficult events."
To reach the agreement, the government had an emergency meeting to approve the move hiking household natural gas prices by 25%, a sensitive measure ahead of presidential and general elections next year.
Lending from the IMF has been essentially frozen since April 2017 as Ukraine's government has slowed efforts at major economic reforms.
The IMF said the new 14-month deal would replace an existing financial-aid package that was first agreed to in
March 2015, about a year after the country was plunged into turmoil amid the so-called Euromaidan mass protests.
Final approval, which must still come from the fund's board later this year, will be contingent on Ukrainian lawmakers approving a 2019 budget that is "consistent with IMF staff recommendations," the IMF said.
That must include increases in household gas and heating rates.
The IMF lending will unlock funding from other financial institutions, including the World Bank and the European Union.
"The approval of the new program is very important for macro-financial stability. In addition to direct financing from the IMF, Ukraine will be able to get access to the World Bank and EU funding, as well as try to borrow in the foreign market,” Oleksiy Blinov, chief economist at Alfa-Bank, said. “This will enable to carry out large foreign debt payments in 2019." (nr/ez)