IMF Disburses Loan Tranche to Ukraine but Says Fighting Poses Risk

The International Monetary Fund on Friday said it agreed to disburse about USD 1.4 B to Ukraine under a stand-by loan deal threatened by escalating fighting in the country’s East.

Today’s disbursement brings total funding released under the stand-by arrangement to some USD 4.5 B, the IMF said in a press release following completion of the first review of Ukraine’s performance under the loan program aimed at boosting Ukraine’s foreign exchange reserves and supporting the state budget.

Four months ago, the global lender approved a USD 17 B loan to aid Ukraine’s economy hit by attacks by pro-Russian separatists in the country’s eastern regions and the annexation of Crimea by Moscow.

The conflict in eastern Ukraine has intensified since, and both the IMF and Ukraine’s government see the economy contracting more than the 5% forecast earlier this year.

“Overall, economic policies have generally been implemented as agreed in the program, as the Ukrainian authorities have persisted in taking difficult measures despite the volatile political situation,” the IMF said.

“However, the conflict in the eastern part of the country is taking its toll on the economy and society, and compensatory measures will be critical to achieve key program targets agreed for 2014 and beyond. The program remains highly challenging and continues to hinge crucially on the assumption that the conflict will subside in the coming months.”

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