IMF offers Ukraine lifeline with tough terms
Print Edition
THE International Monetary Fund pledged up to US$18 billion in loans yesterday to prop up Ukraine’s teetering economy, and the prime minister warned that everyone will feel some pain from the necessary reforms ahead.
Meanwhile, former Ukrainian prime minister Yulia Tymoshenko announced that she will run for president in the vote set for May 25. Tymoshenko, who was released from jail last month following the overthrow of President Viktor Yanukovych, returns as one of the most polarizing figures in Ukraine’s political scene.
In a lengthy, passionate address to parliament in Kiev, Prime Minister Arseniy Yatsenyuk warned that Ukraine was “on the brink of economic and financial bankruptcy” and laid out the fixes needed to put it back on track.
“The time has come to tell the truth, to do difficult and unpopular things,” Yatsenyuk said. “The country is short 289 billion hryvnia (US$25.8 billion), which is practically equivalent to the entire state budget for this year.”
The IMF loan, which is expected to range between US$14 billion and US$18 billion, hinges on structural reforms that Ukraine has pledged to undertake.
Ukraine’s new government finds itself caught between the demands of international creditors and a restive population that has endured decades of economic stagnation and mismanagement. The reforms demanded by the IMF — which included raising taxes, freezing the minimum wage and hiking energy prices — will hit households hard and are likely to strain the interim government’s tenuous hold on power.
Other donors, including the European Union and Japan, have also pledged further aid, conditional on the conclusion of an IMF bailout. The total amount of assistance will be about US$27 billion over the next two years.
Tymoshenko will make a second attempt to win the presidency. She narrowly lost to Yanukovych in 2010 and spent two years in jail on corruption charges.
“I will be the candidate of Ukrainian unity,” Tymoshenko said yesterday. “The west and center of Ukraine has always voted for me, but I was born in the east.”
Ukraine is politically divided, with western regions favoring closer ties to Europe and the east looking toward Russia. But the dire state of its economy is an unavoidable issue: Ukraine says it needs US$35 billion over the next two years to avoid default.
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