December 27, 2013 / 1:52 PM / 5 years ago

Russia may use IMF special drawing rights as part of Ukraine's $15 billion bailout

Russia's Prime Minister Dmitry Medvedev (R) speaks with his Ukrainian counterpart Mykola Azarov during a meeting in Moscow December 24, 2013. REUTERS/Yekaterina Shtukina/RIA Novosti/Pool

MOSCOW/KIEV (Reuters) - Russia may use special drawing rights (SDRs), a reserve asset created by the International Monetary Fund, as part of a $15 billion bailout for Ukraine, Prime Minister Dmitry Medvedev said on Friday.

Ukraine is likely to use part of the bailout to repay its debt to the IMF. Russia agreed to bail out Ukraine by purchasing its securities after Kiev performed a foreign policy U-turn in late November and shelved plans to sign deals on political association and free trade with the European Union.

“We are now also discussing a loan in the form of SDRs,” Medvedev told journalists.

The former Soviet republic is due to pay the Fund 2.4 billion SDRs ($3.8 billion) next year.

The SDR, which also acts as the IMF’s internal accounting unit, comprises the U.S. dollar, British pound, euro and Japanese yen.

The foreign policy shift in Ukraine sparked mass street protests. Opposition leaders and anti-government protesters encamped on Kiev’s main square have criticized the deals with Russia, which they say tighten the Kremlin’s grip on Ukraine.

The Kiev government has so far received $3 billion from Russia through a bond sale. Ukrainian Prime Minister Mykola Azarov told state television on Friday the money had helped the government settle public sector wage arrears.

“We had to use the first tranche to cover the social payouts,” he said, adding that further aid would be used to “modernize the economy”.

Azarov said conditions set down by the IMF - which Ukraine had also asked for a $15 billion loan - were “absolutely unacceptable” and included hryvnia devaluation and public sector job cuts.

Reporting by Darya Korsunskaya; Additional reporting by Pavel Polityuk in Kiev; Writing by Maya Nikolaeva; Editing by Ruth Pitchford

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