IMF's Lagarde: No Need to Panic over Ukraine Economy
International Monetary Fund chief Christine Lagarde urged calm over Ukraine's economic situation on Friday after the country asked for at least $15 billion in financial aid.
"We do not see anything that is critical, that is worthy of panic at the moment," Lagarde said after talks in Washington on Ukraine with German Foreign Minister Frank-Walter Steinmeier.
Lagarde criticized the various numbers mentioned for the size of the country's immediate financing requirements, stressing the need to "rely on facts" and wait until the situation is "assessed properly".
"It is highly premature to assess financial needs," she said.
The comments came as U.S. and European officials discussed how to strengthen Ukraine's teetering economy in the wake of the uprising that overthrew Russian-backed president Viktor Yanukovych.
The revolt led to Moscow canceling a much-needed $15 billion loan to the country after only $3 billion had been disbursed, leaving the government with very little cash in its coffers and dwindling foreign exchange reserves.
On Friday, however, though U.S. Secretary of State John Kerry said that Russia too is willing to join the effort to help Kiev stave off economic collapse.
Kerry said that Russian Foreign Minister Sergei Lavrov indicated during a Friday phone call "that they are prepared to be engaged and be involved in helping to deal with the economic transition that needs to take place at this point."
Just after taking power last weekend, Ukraine's new leaders said the government needs $35 billion in financial support to remain afloat and avoid defaulting on its debt.
But on Thursday, Finance Minister Olexandr Shlapak said the government was requesting less than half that figure from the IMF.
"We will be asking for at least $15 billion. But things will become more clear when the time comes," he said, adding that its was premature to mention specific figures.
A global banking association, the International Institute of Finance, said even if Ukraine slashes fuel subsidies and undertakes other needed reforms, it would require $20 billion in foreign assistance over this year and next to service its debt and cover a large fiscal deficit.
IIF economist Lubomir Mitov stressed that the government needs an injection of funds soon just to keep afloat.
"They need to get some money just to allow the budget to operate," he told Agence France Presse. "Soon is a matter of days."
But getting quick bilateral support will be a challenge.
"People are very reluctant to give a blank check to Ukraine," Mitov said.
"The European and the U.S. are very reluctant to bankroll any Ukraine government, given their past record."
Steinmeier, the German foreign minister, said in Washington that any support should have a wide base of contributors.
"The stabilization of Ukraine can only be successful if we get as many partners as possible on the table," he said, urging Moscow to join the effort.
Shlapak said the new authorities in Kiev will seek to persuade Moscow to restore their promised financial support.
"We will try to do this as soon as possible - perhaps even next week," he said, according to the Interfax-Ukraine news agency.
Mitov described a dire situation in the Ukraine economy in which banks, already extremely weak, have seen runs on deposits, the government has missed pension and salary payments, and factories in some areas have halted production due to a lack of orders.
The central bank has effectively been printing money to finance the government, exacerbating the sharp fall in the Ukraine currency, the hryvnia.
The hryvnia hit a record low on Thursday of 11.31 to the dollar, but rebounded Friday to 9.18 per dollar after the central bank acted to calm markets by placing controls on bank withdrawals.
Withdrawals were capped at 15,000 hryvnia per day.
Lagarde said an IMF team would head to Ukraine early next week to assess the situation and discuss the policies that the country would have to follow to qualify for a support program.
Source: Agence France Presse
| Copyright © 2012 Naharnet.com. All Rights Reserved. | https://naharnet.com/stories/en/120702 |