Ukraine to swallow bitter pill, initiate reforms for financial assistance

KIEV, Ukraine, Feb. 27 (UPI) -- Ukraine's new government said that it is willing to initiate "wide-ranging reforms," in exchange for financial assistance from the International Monetary Fund.

The IMF said the country had made a formal request for financial assistance and that they were aware of the urgency of the situation and were acting accordingly.

“We will be ready to engage, ready to help,” IMF Managing Director Christine Lagarde said this weekend. “We, of course, try to go further and play the catalytic role that the IMF typically plays in such situations.”

U.S. Secretary of State John Kerry told reporters on Wednesday that the U.S. was considering providing $1 billion in loan guarantees, to complement the IMF's efforts. He said they were also looking at directly infusing money into the Ukrainian economy.

“Personally, I don’t think it is enough for us to be heralding the advent of democracy and to applaud the courage and conviction of the people who brought about this transition and then just not do anything,” he said. “I think that is unconscionable.”

But experts say that there has to be legitimate government in place, before a request for assistance can be made and then the government has to agree to stringent economic reforms such a package would come with.

“We need to have somebody to talk to, OK?” said Christine Lagarde, the managing director of the IMF, answering questions about Ukraine from journalists last weekend in Sydney, Australia. “Any discussion takes two.”

According to Washington-based Institute of International Finance, Ukraine's economy is “on the verge of collapse.” Ondrej Schneider and Lubomir Mitov of the institute said that while all the focus has been on the solving the political crisis, which is still unresolved, delayed economic reform could be potentially disastrous.

Analysts say that any package would be around $10 billion to $20 billion in short-term lending. The IMF is sure to ask Ukraine to raise domestic gas prices, cut spending and allow the national currency to float on the international market.

[Businessweek] [NYT]