Western leaders have agreed to provide Ukraine with a 17-billion-dollar bailout (about 12 billion euros) despite the pro-Russia movements and uprisings active in the east and south of the country. The International Monetary Fund (IMF) expressed its faith in the future of Ukraine, although the country’s incumbent leadership led by President Oleksander Turchynov seems to be helpless in dealing with the unrests.
A part of the bailout is reportedly tailored as an emergency assistance (3.2 billion USD) with the rest to be paid as a “stand-by arrangement” in the next two years. The money will be subject to “frequent reviews” of Ukraine’s compliance with austerity policies based on the model of Brussels bailout of Eurozone states. IMF official, Reza Moghadam, said that Kiev would have to tame its public wage and pension rises, fight corruption in tax collection and public procurement. Moreover, the country will also have to increase tax on alcohol and tobacco as well as gas prices, a move that is forecast to hit about 4.5 million Ukrainian households.
Mr Moghadam noted that the Ukrainian authorities saw the bailout program as a historical break with a past marked by crony capitalism, pervasive corruption, and poor governance. In his opinion, the authorities are confident that there is a window opportunity for bold and ambitious reforms in order to make Ukraine a dynamic and competitive emerging market economy with a healthy business environment and a transparent government.
The Western bailout comes as an extra aid package on the top of an 11-billion-euro assistance program, EU trade tariff reductions worth 500 million euro annually, and a 1-billion-dollar US loan guarantee framework. The West’s aid endeavour is partly seen as a response to Russia’s attempt to destabilise the Ukrainian economy by major gas price hikes before the elections on May 25. In Mr Moghadi’s opinion, though, the biggest threat to the stability and development of the country are “geopolitical tensions” triggered by pro-Russian uprising throughout Ukraine’s south and east.
