IMF to give assessment on Ukraine bailout request

The International Monetary Fund will deliver an assessment to Ukraine today on its bailout request as the US continues to muster global support for penalising Russian encroachment on Ukrainian territory.

Battling dwindling reserves and the threat of its third recession since 2008, Ukraine is seeking a loan of $15 billion to $20 billion, finance minister Oleksandr Shlapak said.

Prime minister Arseniy Yatsenyuk has pledged to take any steps needed to obtain the lifeline.

The cabinet, in power since pro-Kremlin President Viktor Yanukovych was ousted last month, wants to stabilize Ukraine after four months of political crisis, while facing the threat of further Russian military incursion.

Unpopular measures like those in the IMF-endorsed austerity campaigns that triggered protests and toppled governments from Greece to Spain during the euro area debt crisis risk destabilizing the country further, said Olena Bilan, an economist at Dragon Capital.

“The government is willing to implement reforms and meet the IMF’s requirements,” Ms Bilan said by phone from Kiev.

“A sharp drop in purchasing power may fuel the ongoing instability in eastern Ukrainian regions.”

Mr Yatsenyuk’s interim government is bracing for an economic contraction that Shlapak forecast at 3 percent this year.

The prime minister, who has compared his cabinet to a “political kamikaze,” has heralded decisions to cut subsidies and welfare payments and said he’s ready to be “the most unpopular prime minister” in history.

As the government in Kiev pursues the help it needs to avert default, US president Barack Obama is scheduled to speak today on what the standoff with Russia over Ukraine means for European security.

Yesterday, he warned President Vladimir Putin that Russia would face more sanctions if it moved further into Ukraine after it annexed the Black Sea peninsula Crimea. “It is now up to Russia to act responsibly and show itself to be once again willing to abide by international rules,” Mr Obama said at a news conference in The Hague. “If it fails to do so, there will be additional costs.”

Russia has consolidated control over Crimea and is massing forces along the border with Ukraine in what Obama called “an effort of intimidation” in the most serious conflict with the US and its allies since the collapse of the Soviet Union.

Bloomberg