Ukraine, IMF Reach Deal On New $4 Billion Loan

Prime Minister of Ukraine Volodymyr Hroysman (file photo)

The International Monetary Fund said it had reached a new agreement with Ukraine, paving the way for a fresh $4 billion loan.

The agreement followed an announcement earlier on October 19 by Prime Minister Volodymyr Hroysman that household gas rates would rise by nearly 25 percent.

Aid from the fund, known as the IMF, has been essentially frozen since April 2017 as Ukraine's government has slowed efforts at major economic reforms.

The IMF said the new 14-month deal would replace an existing financial-aid package that was first agreed to in March 2015, about a year after the country was plunged into turmoil amid the so-called Euromaidan mass protests.

Final approval, which must still come from the fund's board later this year, will be contingent on Ukrainian lawmakers approving a 2019 budget that is "consistent with IMF staff recommendations," the IMF said.

That must include increases in household gas and heating rates.

In televised comments earlier on October 19, Hroysman said gas prices would be raised by nearly 25 percent beginning November 1. He said Ukraine risked default if it failed to meet the IMF conditions.

"We have no other option to prevent extremely difficult events," Hroysman said.

The hike in gas rates is politically unpopular and comes just as the country is gearing up for presidential elections in March.

Gas rates have been kept artificially low since the Soviet era, which economists say has resulted in waste and inefficiency.

With reporting by Reuters