You're reading: Ukraine can get EU cash if it secures IMF loan

 The European Union is ready to provide a 610 million euro credit if Ukraine signs a new agreement with the International Monetary Fund, EU Commissioner for Trade Karel de Gucht said on Oct. 2 in Kyiv.

He said that Ukraine will
be free in its choice how to use this loan, but most likely it would
go to replenish foreign currency reserves. “Normally, (such loans)
would be used to support accounts of the state,” he said.

Ukraine will resume talks
with the IMF in Washington on Oct. 10, according to Oleksandr
Dubikhvost, head of the department for management of hard currency
reserves and operations on external markets. Interfax-Ukraine news
agency quoted him as saying that Ukraine’s delegation plans to visit
the annual meeting of the IMF.

Ukraine has not had any IMF financing
since 2010, when a $15.2 billion loan program fell
off track. Ukraine only received $3.4 billion of this money. The
latest IMF mission came to Ukraine in March-April this year, but left
without a new deal because of Ukraine’s refusal to meet
conditions, namely raising energy prices for the population,
relaxing the hryvnia rate and reducing deficits.

Ukraine has been making ends meet by
borrowing heavily on international markets, as well as domestically
to cover large foreign debt repayments. It
also raised a a $750 million syndicated loan with the help of
Russia’s Sberbank Also. It has been
draining its foreign reserves, which
now stand at $21.7 billion – the
equivalent of less than three months of imports.

Ukraine faces foreign debt payments of
$10.8 billion by the end of 2014. But after Moody’s investor
service downgraded Ukraine’s government bond rating to Caa1 from B3,
with negative expectations, international markets have turned against
the country’s sovereign debt. 

Unable to tap into the markets,
Ukraine’s government has gone back to negotiating for loans with
international institutions. De Gucht said the European loan would be
“a part of a package of loans expanded by the IMF, the EU and a
number of EU members.” But he said it was conditional on resuming
cooperation with the IMF.

Ukraine also hopes to sign a Deep and
Comprehensive Free Trade Agreement with the EU this November, which
is a part of a bigger Association Agreement. But de Gucht said a
number of economic conditions have to be met, as well as political,
before that happens.

He said the outstanding issues include
safeguard measures Ukraine wants to keep for its car industry,
discriminatory recycling fees for imported cars, the nation’s
attempts to renegotiate its WTO commitments, local content requirements for green energy, as well as the general
worsening of business climate.