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IMF billions for Ukraine

May 7, 2014

Ukraine's central bank has received a first aid tranche from the International Monetary Fund, aimed at shoring up the Eastern European nation during its ongoing stand-off with Russia. But there are strings attached.

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EU and Ukraine flags
Image: Yuriy Dyachyshyn/AFP/Getty Images

Ukrainian central bank officials confirmed Wednesday they'd received an initial slice of aid worth $3.19 billion (2.29 billion euros) from the International Monetary Fund (IMF).

The central bank put more than $1 billion into its foreign currency reserves, while passing the rest along to the state budget.

The tranche is part of an overall IMF package of $17 billion. Kyiv is expected to use a big chunk of the money to pay an outstanding debt to Russia's state-owned utility company Gazprom.

Ukraine depends on Russia for most of its gas supplies, and it has been chronically in arrears on payments. Gazprom has threatened to turn off the taps unless it receives advance payment for the coming month's gas delivery.

No such thing as a free lunch

The IMF has made it abundantly clear that there are strings attached to the aid package. Ukraine is obliged to raise gas tariffs for households by 56 percent starting from Thursday, and must increase heating tariffs by 40 percent on average from July 1.

Also, the government is called upon to support utility payments for roughly 27 percent of families unable to afford higher energy prices.

The IMF loans were granted after Kyiv agreed to complete 'stress tests' on its largest banks by July 31st, assessing their capital adequacy.

hg / nz (Reuters, AFP)