IMF Approves Bailout Payment to Ukraine

By Dow Jones Business News, 
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The International Monetary Fund on Friday approved the latest payment to Ukraine in its $17 billion bailout program, providing a critical boost to Kiev as it faces military, economic and political threats.

The IMF board approved a $1.39 billion payment, which will bring total disbursements under the program to $4.51 billion. The IMF also approved Kiev's request to combine the next two reviews scheduled for this year.

The fund said Ukraine has generally followed the IMF's guidelines despite continued pressure on the country's economy. "Downside risks to the program remain very high," IMF managing director Christine Lagarde said in a statement. "The program success hinges on a timely resolution of the conflict in the East, as well as on the authorities' strong policy performance and adherence to the planned reforms."

Months after Russia moved to annex the Crimea region this spring, Ukraine is fighting a growing Russia-backed military force along its eastern borders. Moscow has denied military involvement, blaming the fighting against Kiev on volunteers, separatist fighters and some disoriented Russian troops.

On the economic front, Russia's energy minister said Friday that negotiations on Ukraine's gas debt can't start until Kiev pays $1.45 billion of debt to Russian gas giant OAO Gazprom.

For Ukraine's government, the onset of cold winter months could exacerbate an already fragile outlook, with the economy battered by months of turmoil and civil war in the east of the country.

Prime Minister Arseniy Yatsenyuk this week called for swift steps to stabilize the hryvnia, the local currency, which has fallen steeply in the last year. The IMF backs a flexible exchange rate rather than the peg to the dollar that Kiev previously maintained.

Ms. Lagarde said Kiev needs to address the level of its foreign-currency reserves, tighten its budget for 2015 and 2016 and work to put Ukraine's natural-gas giant, Naftogaz, on a "sound financial footing."

In July, Ukraine's ruling coalition broke up, setting the stage for parliamentary elections that could strengthen the hand of President Petro Poroshenko as he backs a fight against the insurgency in the east.

Write to William Mauldin at william.mauldin@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


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  08-29-141255ET
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