February 22, 2014 / 12:55 AM / 6 years ago

U.S. says assures Ukraine of its support in IMF talks

WASHINGTON (Reuters) - The United States has assured Ukraine it will have “strong support” from Washington in seeking an IMF-backed economic program to stabilize the country’s economy after months of crippling street violence, a State Department official said on Friday.

A fragile peace deal between Ukraine’s government and opposition was struck late on Thursday, ending months of violence in which 77 people were killed.

The agreement was also an opportunity to stabilize Ukraine’s economy and resume talks with the International Monetary Fund, the senior State Department official said, speaking to reporters on condition of anonymity.

Ukraine has failed to fully implement previous economic programs, which have required politically difficult reforms. Russian-backed President Viktor Yanukovich has relied on a $15 billion bailout from Moscow to prop up the economy, but it is unclear whether Russia will make promised payments.

Ukraine canceled a planned issue of 5-year Eurobonds worth $2 billion and had hoped Russia would buy the bonds to help stave off bankruptcy.

But the senior State Department official suggested that as the country moves to implement the peace accord, which calls for early elections and formation of a unity government, it should turn to the IMF rather than depend on Moscow’s aid.

The official said the United States had made clear to Yanukovich that if he was prepared to adopt reforms and have a broad-based unity government, “he would have strong support from the United States during that process and after that process and among our European partners as well.”

The official said that going the IMF route “was a far more sustainable path to stabilizing the Ukrainian economy than any other path on offer.”

Analysts have warned that if Russia withdrew its financial aid, the United States and Europe would need to be ready to step up with loans and guarantees to help Ukraine.

But the State Department official insisted Ukraine would need to turn to the IMF.

“What we are hoping to see when this national unity government is established is a group of people who are empowered and prepared to roll up their sleeves extremely quickly with the IMF, to take stock of what needs to be done in terms of reform so Ukraine can very quickly be eligible for IMF support,” the official added.

IMF insiders say the international institution would be wary of lending to an interim Ukrainian government given the country’s history of weak economic reforms.

The IMF’s recent experience in Greece, where reforms amid a fragile, austerity-weary coalition government have been difficult, would make it wary of lending to Ukraine without a strong political commitment to economic changes, according to the IMF insiders.

Still, the United States and Europe, which have pushed for political change in Ukraine, are the IMF’s largest and most influential member countries and are likely to press the Fund to do whatever it can to support Ukraine.

With the backing of the United States and Europe a new lending program is likely to pass.

“An IMF agreement unlocks all kinds of other vehicles ... and other kinds of international support that could help the Ukrainians make the structural adjustment and transition their economy back to good health,” the State Department official said.

“We have been talking about the opportunities that are available through the IMF for months and months with the Ukrainians and have accelerated those discussions in very concrete terms with the government and opposition over the last month or so,” the official added.

Reporting by Lesley Wroughton; Editing by Ken Wills

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