The International Monetary Fund has agreed to pump $10 billion into Ukraine's troubled economy over the next year, providing swift assistance for the country's struggling finances as part of a larger four-year bailout.
The IMF board on Wednesday approved an overall loan of $17.5 billion, with the bulk of the money heading out the door fast: $5 billion likely by the end of this week and another $5 billion in coming months, IMF officials said.
That will be combined with $7.5 billion in loans from other international organizations and an expected $15.4 billion in debt relief that Ukrainian officials hope to negotiate with their bondholders.
The program “is very strongly front-loaded during the first year,” IMF Managing Director Christine Lagarde said in Berlin. “Ukraine has satisfied all the prior actions that were expected and required of it in order to start running the program... We are off to a good start.”
The program aims to provide what Lagarde referred to in a statement as “immediate economic stabilization” to a country beset by conflict with Russia and uncertainty about its territorial integrity.
Prime Minister Arseny Yatseniuk in a televised statement said the impact of the IMF program should be felt quickly in a country struggling with balance of payments problems and a crashing currency.
The program “will enable us to stabilize the economy and the financial sector. It will be used to stabilize the currency. It will enable the Ukrainian economy to grow from 2016,” Yatseniuk said.
After a year of political upheaval and war, Ukraine's economy is in a tailspin with a currency that just pulled back from record lows, the highest interest rates in 15 years, and central bank reserves of just $6.4 billion, barely enough to cover five weeks of imports.
The IMF last year already approved a $17 billion, two-year loan to Ukraine, but deemed the effort insufficient to support economic reform while the government continued to battle pro-Russia separatists in eastern Ukraine.
The unrest in the east follows months of upheaval from anti-government protests and Russia's subsequent annexation of the Crimea region.
Ukraine's parliament last week approved a raft of IMF-backed amendments to its 2015 draft budget which were key preconditions for IMF approval of the bailout.