IMF agreed to provide 18 billion dollar loan to Ukraine

The International Monetary Fund (IMF) agreed on 27 March 2014 to provide loan to Ukraine worth 18 billion dollars for next two years.

Under the IMF deal Ukraine will have to cut the budget deficit, raise taxes, shift to a flexible exchange rate and increase retail energy tariffs toward their full cost.

The Ukrainian Parliament needs to pass a set of reforms to accept the package of IMF.  Then IMF board will revive the deal in April 2014. It may also provide an opportunity to receive the loans from United States and the European Union which brings in total 27 billion dollars for two years.

Due to financial crisis in Ukraine, the IMF package will have significant impact on the Ukrainian economy. For instance, inflation will increase up to 14 percent on account of rise in the household gas prices by 50 percent to meet the full cost recovery condition from May 2014 announced by the Ukraine government. Besides, Income tax rates would rise from 15 to17 percent. The government estimated that it needs about 35 billion over two years to recover from this economic crisis.