US guarantees major new Ukraine loan

The pledge is meant to provide Ukraine with more affordable access to international capital markets and fill its gaping budget hole.

Published: 03rd June 2016 06:02 PM  |   Last Updated: 03rd June 2016 06:02 PM   |  A+A-


KIEV: The United States said today it had signed a major new loan guarantee with Ukraine aimed at helping the war-scarred former Soviet republic stabilise its floundering economy.

The USD 1-billion (900-million-euro) commitment is the third of its kind issued by Washington since a pro-EU revolution brought down Ukraine's Russia-backed president in February 2014.

The pledge is meant to provide Ukraine with more affordable access to international capital markets and fill its gaping budget hole.

"The guarantee sends a strong signal of the United States' continued support for Ukraine as it pursues reforms that fulfill the Ukrainian people's aspirations for a prosperous and democratic future," US Ambassador Geoffrey Pyatt said in a statement.

The new US assistance is part of a USD 40-billion global rescue package agreed by Ukraine and the International Monetary Fund in March 2015.

About USD 17.5 billion of that money is a loan from the Fund. The rest includes a restructuring programme approved by Ukraine's private Western creditors and assistance from individual governments and international institutions.

The IMF had been frustrated by the slow adoption of painful belt-tightening measures that were resisted by populist parties and helped weaken leaders who rose to power after Ukraine's 2014 turn toward the West.

Allegations of government corruption led to the resignation of prime minister Arseniy Yatsenyuk and his replacement by pro-Western parliament speaker Volodymyr Groysman in April.

Ukraine has so far only received USD 6.7 billion in IMF disbursements and none since August 2015.

But the sides last month reached a staff-level agreement to resume the programme after parliament adopted a raft of austerity measures prescribed by the IMF.

That progress allowed Kiev's other partners to resume their own lending and help Ukraine shed the dysfunctional economic legacy of its Soviet past.

Kiev hopes to receive USD 1.6 billion in fresh funds from the IMF by July.

Yet some economists warned that the new pro-Western coalition created in parliament during Groysman appointment was fragile and its economic measures under threat of being undermined by nationalist and populist factions.

"Substantial risks to a fruitful IMF cooperation remain as the government has a rather thin parliamentary majority," Austria's Raiffeisen Bank said in a research note.

The east European nation's economy contracted by 9.9 per cent last year but appears to be on course to achieve modest growth in 2016.

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