IMF to provide $17.5bn for Ukraine over four years

The International Monetary Fund will provideUkraine with $17.5 billion in funding over the next four years, Managing Director Christine Lagarde said in Brussels on Thursday.

The $17.5 billion IMF package along with additional resources from the international community adds up to $40 billion in funding for the country which is on the brink of bankruptcy due to the year-long conflict with pro-Russian separatist rebels in the eastern part of the country.

Lagarde’s announcement Thursday came on the same day as leaders of Ukraine, Germany, France, Russia and France in the Belarusian capital of Minsk reached a cease-fire deal over the Ukrainian conflict.

"The main risk of course relates to the geopolitical developments that may affect market and investor confidence," Lagarde said.

The agreement is subject to approval by IMF Management and its Executive Board. 

"This new four-year arrangement would support immediate economic stabilization in Ukraine as well as a set of bold policy reforms aimed at restoring robust growth over the medium term and improving living standards for the Ukrainian people," Lagarde said in a statement.

"It is an ambitious program; it is a tough program; and it is not without risk. But it is also a realistic program and its effective implementation -- after consideration and approval by our Executive Board -- can represent a turning point for Ukraine," she added.

"The second front in the war in Ukraine is the financial crisis," Finance Minister Natalie Jaresko said Feb. 9 in an interview.

The war cost the country $7 million to $10 million daily, Jaresko said.

Since the beginning of the conflict, the Ukrainian currency has lost more than half its value against the dollar, and foreign currency reserves have shrunk to almost zero, Jaresko said.  

Inflation has climbed to 25 percent, and 20 percent of the economy is simply gone because of lost territory, with the remaining economy shrinking by 7.5 percent in 2014 and expected to continue shrinking this year, Jaresko warned.