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Is prosperity Ukraine's best defence?

Thursday, March 12, 2015 - 02:04

Ukraine must push through painful reforms and austerity in return for its new loan from the IMF. Sonia Legg looks at the impact the cuts could have on an already damaged economy?

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A shaky ceasefire in Donetsk allows residents to queue for humanitarian aid. It's much needed. So too is a new loan to Ukraine from the International Monetary Fund. Christine Lagarde is its Managing Director. (SOUNDBITE) (English) MANAGING DIRECTOR OF THE INTERNATIONAL MONETARY FUND, CHRISTINE LAGARDE, SAYING: "The 17.5 billion programme, which is an extended fund facility over a period of four years, is very strongly front-loaded during the first year. The plan is to disburse about $10 billion dollars worth of financing during the first year." But there are conditions attached. Ukraine must implement reforms and introduce austerity measures. For an economy already reeling from the conflict with Russia that could be a tall order. IG's Chris Beauchamp. (SOUNDBITE) (English) IG, SENIOR MARKET ANALYST, CHRIS BEAUCHAMP, SAYING: "The cost of fighting a war - and Russian backed militia is something that escalates day after day. This loan will only tied them over for the time being." Ukraine's economy is in a tailspin. Its currency is close to record lows, interest rates are at a 15 year high and the central bank has only $6.4 billion left - barely enough to cover five weeks of imports. (SOUNDBITE) (English) IG, SENIOR MARKET ANALYST, CHRIS BEAUCHAMP, SAYING: "In a sense it has to continue to run faster to stay in the same place. I would expect to see more bailouts coming through from the IMF and other partners of the IMF trying to keep Ukraine ticking over on a daily basis - it's almost a situation akin to Greece but on a far greater scale." Prosperity and stability could be Ukraine's best defence against a struggling Russia. But Saxobank's Nick Beecroft questions the IMF's 2016 growth predictions. SOUNDBITE (ENGLISH) NICK BEECROFT, SENIOR MARKET ANALYST, SAXO BANK, SAYING: "I don't think Europe will see more than one percent growth and Russia will be down 4-5 percent. I think 2 percent is rather optimistic - zero growth, flatline is probably more realistic." Either way these Crimea refugees learning a new language in Kiev see little hope of a return home any time soon. 40,000 have left the region since Russia invaded.

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Is prosperity Ukraine's best defence?

Thursday, March 12, 2015 - 02:04