IMF delays more aid to Ukraine to assess cost of blockade

KIEV (Reuters) - The International Monetary Fund has postponed a decision to disburse more aid to Ukraine in order to assess the impact of an economic blockade Kiev imposed on separatist-held territory, the IMF and Ukrainian authorities said on Sunday.

The IMF’s Executive Board was due to meet on Monday to approve more assistance as part of a $17.5 billion bailout program for the war-torn nation, in exchange for the pro-Western government passing reforms and tackling corruption.

But Ukraine and the IMF must first assess the fallout from a decision last week by President Petro Poroshenko to suspend all cargo traffic with rebel-held territory, the finance ministry and central bank said.

The decision follows an existing blockade by Ukrainian activists and MPs that has prevented coal supplies from reaching power plants and the steel industry since late January.

The central bank has previously said economic growth could nearly halve this year to 1.5 percent if cargo traffic did not resume.

“Updated macroeconomic forecasts are to be provided to the IMF,” the central bank said in a statement on Sunday.

“Dialogue and technical consultations with the IMF are continuing,” it said, adding that the bank would hold an unscheduled monetary policy meeting on Monday.

The IMF said in an email its board meeting was delayed “to allow staff time to assess the implications of recent developments for the program. Staff expect to announce a new date soon.”

Finance Minister Oleksandr Danylyuk said new consultations with the IMF would be completed “as soon as possible.”

The blockade prompted Russian-backed separatists to seize businesses that are registered in Ukraine, including companies belonging to the country’s richest man, Rinat Akhmetov.

The crisis has put pressure on Prime Minister Volodymyr Groysman’s government just as it is about to lose its year-long immunity from facing any vote of no confidence. It was appointed last April by a fragile coalition that includes Poroshenko’s party, after the previous government fell.

Russia has called on Ukraine to end the blockade, saying the situation risked turning into a “humanitarian catastrophe”.

But Ukraine said the blockade will remain in force until the separatists hand back control of the businesses they seized and abide by the terms of a 2015 peace agreement. Fighting between Ukrainian troops and rebels has killed more than 10,000 so far.

Additional reporting by Alessandra Prentice; Editing by Clelia Oziel