The International Monetary Fund announced today that it will give Ukraine up to $18 billion in loans over the next two years, to shore up its fragile economy in the midst of equally perilous political crisis. Once other countries join the bailout plan Ukraine should see a total of $27 billion in loaned funds over that period. But the money comes at a steep price.
On Wednesday, leaders in Kiev agreed to hike up gas prices by 50 percent starting on May 1, and to phase out all energy subsidies by 2016 in preparation for the bailout deal. According to Prime Minister Arseny Yatseniuk, the price in local gas could rise by 79 percent altogether. Yatseniuk explained to parliament that the austerity measures were necessary to secure the deal, without which the Ukrainian economy could shrink by up to 10 percent this year. In short, he said, "Ukraine is on the edge of economic and financial bankruptcy."
In a statement, IMF Mission Chief for Ukraine Nikolay Gueorguiev offered more details on the deal, which is pending approval by the IMF Management and the Executive Board next month:
The mission has reached a staff-level agreement with the authorities of Ukraine on an economic reform program that can be supported by a two-year Stand-By Arrangement (SBA) with the IMF. The financial support from the broader international community that the program will unlock amounts to US$27 billion over the next two years. Of this, assistance from the IMF will range between US$14-18 billion, with the precise amount to be determined once all bilateral and multilateral support is accounted for...
Gueorguiev also explained the ultimate purpose of the bailout:
The goal of the authorities’ economic reform program is to restore macroeconomic stability and put the country on the path of sound governance and sustainable economic growth while protecting the vulnerable in the society. The program will focus on reforms in the following key areas: monetary and exchange rate policies; the financial sector; fiscal policies; the energy sector; and governance, transparency, and the business climate.
The White House, still attempting to punish Russia for annexing Crimea with seemingly ineffective sanctions, commented that the deal "represents a powerful sign of support from the international community for the Ukrainian government," adding:
The IMF program will be a central component of a package of assistance to support Ukraine as it implements reforms and conducts free and fair elections that will allow all the Ukrainian people to determine the future of their country.
Speaking of elections, today former prime minister Yulia Tymoshenko formally announced that she will run for president in the upcoming May election:
Tymoshenko: Ukraine's future is not possible with oligarchs pic.twitter.com/FBo9VYCx7G— Maxim Eristavi (@MaximEristavi) March 27, 2014
Tymoshenko, who was released from prison last month after ousted prime minister Viktor Yanukovych fled from his palace, is a controversial figure with her own history of corrupt leadership, which she denies:
Based on her announcement, if Tymoshenko wins things could get pretty heated in Kiev again:
Tymoshenko: We are at war with Russia pic.twitter.com/SL5XuOl4fP— Maxim Eristavi (@MaximEristavi) March 27, 2014
This article is from the archive of our partner The Wire.