Ukraine urgently needs $15 billion or goes bankrupt - Financial Times
New York - Kyiv, December 10 (PolitNavigator, Vasily Ablyazimov) - The International Monetary Fund says that Ukraine urgently needs an additional $15 billion within a few weeks, or otherwise financial collapse cannot be avoided. The IMF formally addressed this statement to the heads of Western governments, writes the Financial Times today.
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IMF calculations have exposed the critical state of the Ukrainian economy. The IMF itself announced a loan of $17 billion, the distribution of which will stretch until 2016. But the country, according to the fund, needs money instantly, otherwise financial collapse cannot be avoided.
The sharp budget deficit, according to the IMF, was due to a 7 percent contraction in Ukraine's gross domestic product and a decline in exports to Russia, the country's largest trading partner, which led to massive capital outflows and a sharp decline in the NBU's gold and foreign exchange reserves.
The rebel regions in the east accounted for almost 16 percent of Ukraine's economic output before the outbreak of hostilities.
Without additional help, Kyiv will be forced to massively cut its budget or default on its sovereign debt obligations. Since the rescue program began in April, Ukraine has already received $8,2 billion, according to the Financial Times, from the IMF and other international lenders.
Pierre Moscovici, EU Commissioner for Economic and Monetary Affairs, said the EU's aid program for Ukraine was the third largest, amounting to $2 billion in loans. At the same time, the Ukrainian government has once again made a request for an additional €2 billion from Brussels.
But Pier Carlo Padoan, the Italian finance minister, debating Ukraine's financial situation at a meeting with his EU counterparts on Tuesday, said EU resources should only be mobilized if Kyiv takes "decisive steps" to implement reforms.
At a meeting of the Cabinet of Ministers in Kiev, Ukrainian Prime Minister Arseniy Yatsenyuk insisted that his government is ready to take unpopular measures, including deep spending cuts, a blow to the massive shadow economy and the sale of uncompetitive companies.
“It’s difficult for us to make ends meet,” Yatsenyuk said. “We don’t ask for money, we don’t moan. We say: we are partners. If we are partners, then help us, and this help will go in both directions.”
Under IMF rules, the fund cannot distribute aid unless it is confident that the country can meet its financial obligations over the next 12 months, meaning the fund is unlikely to send any additional money to Kiev while the budget deficit is $15 billion. .will not be closed.
The scale of the problem became clearer last week after the NBU said its foreign exchange reserves had fallen from $16,3 billion in May to just $9 billion in November. The data also showed that the value of gold and foreign exchange reserves fell by almost half compared to the same period. A source with direct knowledge of the central bank's policies, writes the Financial Times, indicated that the fall in the NBU's gold and foreign exchange assets was due to large-scale sales of gold.
An IMF mission has now begun negotiations in Kyiv with the government on the future of the lending program.
The Financial Times reports that concerns over Ukrainian finances have become so serious that Wolfgang Schaeuble, Germany's finance minister, has asked his Russian counterpart Anton Siluanov not to demand a $3 billion loan that Kiev is due to give to the Kremlin in 2015.
George Osborne, Britain's Chancellor of the Exchequer, expressed surprise, saying the EU was now asking Russia for help while imposing sanctions on it.
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