A new aid plan for Kiev — larger and longer — is under discussion and raises the risk for the global crisis lender as Ukraine sinks deeper into war against pro-Moscow separatists.
Less than a year ago, the IMF agreed to a $17 billion, two-year loan to help the country rebuild its finances and economy. But already that is proving not nearly enough.
The original program “was based on unrealistic economic and political assumptions and didn’t take enough into account the impact of the war in the east,” explained Lubomir Mitov, an expert on the Ukraine economy at the Institute of International Finance, the global banking lobby.
The Ukrainian authorities formally requested a new program from the IMF this week which could be stretched out over three or four years and, without doubt, will include more money.
That though would see the Fund doubling down on its bet on a country where security issues have only worsened since it first intervened last April.
Talks are well underway, with a proposal planned for submission to the IMF board expected by the end of the month. The IMF’s own view has been that Kiev needs another $15 billion to keep it stable through the end of 2015.
“It’s a risky but necessary decision to provide a little bit of a breathing room to the Ukranian authorities,” said Domenico Lombardi, a former member of the IMF board. (AFP)