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Ukrainian protesters sing the national anthem as they hold a giant flag during a rally on Independence Square in Kiev, on March 23, 2014/AFP

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IMF announces $14-$18 billion rescue for Ukraine

Ukrainian protesters sing the national anthem as they hold a giant flag during a rally on Independence Square in Kiev, on March 23, 2014/AFP

Ukrainian protesters sing the national anthem as they hold a giant flag during a rally on Independence Square in Kiev, on March 23, 2014/AFP

KIEV, March 27 – The International Monetary Fund announced on Thursday a $14-$18 billion bailout for Ukraine to avert bankruptcy for the crisis hit country amid its escalating standoff with Russia.

The agreement in principle, worth the equivalent of 10.8-13.1 billion euros, is tied to tough reform conditions which will have a big impact on the Ukrainian economy and people.

The Fund’s Ukrainian mission chief Nikolai Georgiyev said the rescue would form the central part of a broader package released by other governments and agencies amounting to $27 billion (19.6 billion euros) over the next two years.

Georgiyev said the actual size of the “standby agreement” would be determined only once the new Western-backed leaders of Ukraine implemented the reforms the Fund had sought in vain from the cabinet of Kremlin-backed president Viktor Yanukovych.

That government was toppled in February by three months of protests.

“The programme will be approved by the IMF board when the steps that I mentioned are implemented,” Georgiyev told reporters after holding a decisive round of talks with Ukrainian President Arseniy Yatsenyuk on Wednesday.

“We expect (the approval) by the end of April.”

The package announced by the Fund is only slightly smaller than that $15-20 billion (10.9-14.5 billion euros) requested by the former Soviet state’s new leaders when Georgiyev’s mission first arrived in Kiev on March 4.

The Fund has made an immediate end to Ukraine’s costly gas subsidies one of its main conditions for the programme’s approval.

It also wants the central bank to stop propping up the Ukrainian currency and for the government to cut down on corruption and red tape.

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Georgiyev called these two steps as a more committed effort to fight bureaucratic red tape and state corruption “the foundation for stable and sustainable growth”.

The IMF programme was announced one day after the Ukraine’s state energy company Naftogaz said it would increase domestic heating gas prices by 50 percent on May 1.

Naftogaz added that rates for district heating companies would go up by 40 percent on July 1 and that further rate increases were likely in the coming years.

Ukraine’s central bank has already limited its currency interventions — a decision that has seen the hryvnia lose more than a quarter of its value against the dollar since the start of the year.

The IMF programme’s formal approval in April will set in motion the release of further assistance from both Washington and the European Union.

Yatsenyuk said he expected European Union officials to send 1.6 billion euros ($2.2 billion) to Kiev within two months of approval of the loan deal.

The United States has also pledged $1 billion (720 million euros) in loan guarantees while Japan has promised up to $1.5 billion (1.1 billion euros).

Economist believe that the IMF decided to move faster than it may have initially wanted out of concern that the Ukrainian government could become insolvent within a matter of months.

Ukraine’s fast-depleting reserves — spent the previous years on propping up the currency at artificially high rates in order to avoid public discontent — had reached levels sufficient to cover just two months of imports.

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It also owes billion of dollars in foreign debt payment coming due within the next few months.

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