Ukrainian leaders received good news last week, when the International Monetary Fund (IMF) announced that it had approved a “preliminary deal” for the agency to provide billions in IMF funds to enable economic stability to Ukraine as it continues to struggle with Russia over its right to sovereignty.
While the final amount of the aid package won’t be determined until the IMF’s executive board meets in April, sources say the amount will probably be between $14 and $18 billion. At a press conference, IMF Europe Deputy Division Chief Nikolay Gueorguiev stated that the pledged funds would “restore economic stability to Ukraine”, and put Ukraine “on a path of sound governance and sustainable macroeconomic growth to protect the most vulnerable in society”.
Ukrainian leaders have stated that they need as much as $35 billion in international loans to stave off economic collapse. It should be noted that this is not the first time that Ukraine has come to the IMF with their hands out. The country was loaned money by the IMF in both 2008 and 2010, and in both cases, defaulted.
In exchange for these current funds, Ukrainian leaders have agreed to focus on improving their struggling banking and business industries. The IMF money is expected to be particularly helpful in providing capital and liquidity into the country’s banks. Some of the funds will also be applied to Ukraine’s energy industry, in the form of attracting foreign investors.
In all, it’s anticipated that Ukraine may receive as much as $27 billion in donations from various sources over the next two years to assist with economic stability. Contributions from the international community at large may affect the final size of the IMF’s contribution.
The United Kingdom and United States are currently working to put together Ukrainian financial aid packages; although the U.S.’s efforts have been slowed down by what else, internal wrangling between the President and Congress. President Obama wanted any U.S. financial aid deals to include reforms within the IMF itself. In the interest of actually pushing such a package through a recalcitrant Congress however, Democratic leader Harry Reid removed those conditions from the package.
Meanwhile, President Vladimir Putin, who had proposed that Russia lend Ukraine roughly $13 billion, caved under Western pressure, and agreed to work with the IMF to find funding to ease its woes.