WASHINGTON, DC -- Ukraine and the International Monetary Fund staff have agreed to a $14.9 billion, 2½-year stand-by arrangement to aid the country's faltering economy
The staff-level agreement with Ukrainian authorities is subject to budgetary, energy-sector and financial-sector changes through the legislature as well as approval from IMF's management and executive board, which will vote on the matter in late July.
"The goal of the authorities' economic program is to entrench fiscal and financial stability, advance structural reforms, and put Ukraine on a path of sustainable and balanced growth," said IMF Mission Chief Thanos Arvanitis, who just completed a two-week mission in Kiev.
The IMF said the Ukraine must enact enough fiscal adjustment to contain the government deficit to 5.5% of gross domestic product in 2010 and 3.5% in 2011 "with a view to setting public debt firmly on a declining path."
Adjustment will require tax and social security structural reforms and expenditure rationalization combined with efforts to improve tax administration, while additional resources are allocated in the budget to protect the poorest segment of the population, the IMF said.
Financial-sector reforms include requiring an adequate level of capitalization and strengthening the independence of the National Bank of Ukraine.
Energy-sector restructuring will target strengthening the gas sector, cutting state natural-gas company Naftogaz's financial deficit to 1% of GDP in 2010 and balancing its finances in 2011, the IMF said.
"Legislative reforms will be aimed at modernizing the economy and improving business environment to restore robust economic growth over the coming years," the IMF said.