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IMF approves US$17 billion aid deal for Ukraine

WASHINGTON--The International Monetary Fund approved a US$17 billion aid deal for Ukraine on Wednesday, even as Kiev fought to prevent pro-Moscow separatists from grabbing another chunk of the country.

Greenlighting a rescue program for an interim government which took power after an uprising two months ago, IMF chief Christine Lagarde said it was crucial to strengthen Kiev's economy.

“Urgent action was necessary,” the Fund's managing director said, after her executive board's approved of the plan.

“Deep-seated vulnerabilities together with political shock have led to a major crisis in Ukraine,” she warned.

“The economy is in recession, fiscal balances have deteriorated, and the financial sector is under significant stress.”

The global crisis lender's decision opens the way for an immediate deployment of US$3.2 billion to Kiev, which the Fund said has pledged to implement tough reforms.

Those include slashing subsidies for fuel, cutting a large fiscal deficit, getting more control on salary increases, reducing corruption, and strengthening a frail banking system.

The plan also assumes a quick resolution to the country's fight with Russia over some US$2.2 billion owed to Gazprom, and agreeing a new price for gas purchases from the Russian energy giant.

Some of the money from the IMF loan could go toward repaying Gazprom.

“Decisive measures were taken by Ukraine and decisive measures have just been taken by the IMF,” Lagarde said.

But Lagarde conceded that the rescue of Ukraine — which totals US$27 billion with additional aid from the World Bank, the European Union and others — faces with deep challenges, especially geopolitical.

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