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IMF to help Ukraine with up to $18-billion bailout

Friday, March 28, 2014    

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KIEV, Ukraine (AP) — The world rushed to help Ukraine yesterday, with the International Monetary Fund pledging up to $18 billion in loans, the UN condemning the vote that drove Crimea into Russian hands and the US Congress approving even harsher sanctions against Russia.

Yet even with such intensive help to prop up Ukraine's teetering economy, the prime minister warned of painful times ahead from the necessary economic reforms — and home energy prices were certain to rise quickly.

Former Ukrainian Prime Minister Yulia Tymoshenko, one of the country's most polarising figures, announced she would run for president in the May 25 vote — a move sure to usher in strong emotions in Ukraine's turbulent politics.

President Barack Obama called the swell of international support a "concrete signal of how the world is united with Ukraine".

"The decision to go forward with an IMF programme is going to require a lot of courage," Obama said, speaking in Rome. "It will require some tough decisions."

Russia shrugged off the torrent of criticism directed at its annexation of Crimea. President Vladimir Putin's Government announced it would set up its own payment system to rival Visa and MasterCard after the two companies pulled their services from some Russian banks in the wake of international sanctions.

In a passionate address to parliament in Kiev, Prime Minister Arseniy Yatsenyuk warned that Ukraine was "on the brink of economic and financial bankruptcy" and laid out the fixes needed to put the country back on track.

"The time has come to tell the truth, to do difficult and unpopular things," Yatsenyuk said, adding that Ukraine was short $25.8 billion — "equivalent to the entire state budget for this year".

The IMF loan, which is expected to range between $14 billion and $18 billion, hinges on structural reforms that Ukraine has pledged to undertake.

Ukraine's new government finds itself caught between the demands of international creditors and a restive population that has endured decades of economic stagnation, corruption and mismanagement. The reforms demanded by the IMF — which include raising taxes, freezing the minimum wage and hiking energy prices — will hit households hard and are likely to strain the interim government's tenuous hold on power.

Ukraine, a nation of 46 million people, is battling to install a semblance of normalcy since President Viktor Yanukovych was ousted in February after months of protests ignited by his decision to back away from closer relations with the EU and turn toward Russia. Over the last few weeks, an interim government has formed, Ukraine lost Crimea to Russia and further possible military incursions by Russia are feared.

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