IMF throws Ukraine a lifeline
- International Monetary Fund agreed to give a lifeline worth $18 billion to Ukraine’s sinking economy and $14 and $18 billion as loans over the next 2 years, provided it adopts severe austerity measures.
- IMF’s board will approve the package and give 1st installment once the Ukrainian Parliament passes a set of laws on reforms and honours its end of the deal.
- Ukraine is on the edge of economic and financial bankruptcy and the government has to accept the IMF offer.
- Under the IMF deal Ukraine have to cut budget deficit, raise taxes, shift to a flexible exchange rate and increase retail energy tariffs toward their full cost.
- Income tax rates would rise from 15-17 % to 25 % later.
- Floating the hryvnia can push inflation up, hiking gas prices to meet full cost recovery condition will place burden on family budgets as gas is universally used in Ukrainian households for cooking and heating.
- Ukraine’s economy will contract by 3% and inflation will rise up to 14%. Russia has withdrawn gas price discounts to Ukraine and put on hold a $15 billion aid package it pledged to ousted President Yanukovych.
- The price of Russian gas will be double to $480/1000 cubic meters on April 1.
Exams Perspective:
- International Monetary Fund (IMF)
- Ukraine Crisis