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UPDATE 1-RPT-IMF says Ukraine on track with conditions of loan program
August 28, 2014 / 3:05 PM / in 3 years

UPDATE 1-RPT-IMF says Ukraine on track with conditions of loan program

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WASHINGTON, Aug 28 (Reuters) - Ukrainian authorities have complied with all the conditions of their $17 billion International Monetary Fund loan so far, an IMF spokesman said on Thursday, suggesting the country was on track to receive its next disbursement under the program.

Ukraine, which is fighting a pro-Russian separatist rebellion in the east, received $3.2 billion in May as the first tranche of the two-year aid package from the IMF intended to shore up depleted foreign currency reserves and support the state budget.

“The authorities have committed to take a number of policy actions prior to the completion of the (program) review, which has since been implemented,” IMF spokesman Gerry Rice told reporters.

The IMF board will meet on Friday to decide whether to approve the next disbursement to Kiev, likely to total $1.4 billion.

However, the IMF has continued to emphasize the Ukrainian program faces a number of risks due to the conflict in the east, and suggested its current level of assistance will not be enough to meet the government’s financing needs if the situation gets worse.

The government’s tax revenues from the eastern region have fallen, even as Kiev continues to spend money on fighting the separatists.

It is so far unclear what impact the conflict would have on Ukraine’s growth. Economists have said the economy will slide deeper into recession this year, despite the IMF aid deal, as the rebellion cripples activity in the industrial east and scares off foreign investors.

During its last visit to Kiev in July, the IMF downgraded its growth forecast for this year to a 6.5 percent contraction, from 5 percent previously.

“We have said that given the risks to the program, given the situation, that if the situation were to be exacerbated, the program would need to be significantly recalibrated, including potentially the financing,” Rice said. “The degree of uncertainty continues to be very large.” (Reporting by Anna Yukhananov; Editing by Chizu Nomiyama and Tom Brown)

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