Ukraine conflict taking heavy toll on economy says IMF

Woman carrying shopping bags Image copyright Getty Images
Image caption The conflict in eastern Ukraine has taken a big toll on the country's economy

Ukraine's economy is likely to shrink by a worse-than-expected 9% in 2015, an International Monetary Fund (IMF) mission to the country has concluded.

The continuing conflict in the east of the country "took a heavier-than-expected toll on the economy in the first quarter of 2015", IMF mission chief Nikolay Gueorguiev said.

Ukraine's inflation rate will hit 46% by the end of the year, he said.

But Ukraine's commitment to economic reform "remains strong", the IMF added.

Cash-strapped Ukraine has agreed a $17.5bn (£11.5bn) bailout programme with the IMF, and is hoping that the latest $2.5bn tranche of credit will be made soon.

But the IMF will only release the money if it is satisfied the government is serious about reforming its beleaguered economy, which has been crippled by high energy costs, endemic corruption, and the conflict with pro-Russia separatists in the east of the country.

At the end of the 18-day mission to Kiev, Mr Gueorguiev concluded that discussions with the authorities had been "constructive" and that "understandings were reached on most issues".

"All performance criteria for end-March were met and all structural benchmarks due in the spring are on course to be met, albeit some with a delay," he said in a statement.

He praised the government for achieving this in "an exceptionally difficult environment".

The IMF said "signs that economic stability is gradually taking hold are steadily emerging".

Ukraine's gross international reserves grew slightly at the end of April to $9.6bn and domestic currency deposits "have been recovering", said Mr Gueorguiev.

Discussions "will continue in the coming days to finalise a staff-level agreement that can be taken for approval to the IMF management and the Executive Board", he said.

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