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Published: Friday March 14, 2014 MYT 6:35:02 AM
Updated: Friday March 14, 2014 MYT 6:35:02 AM

IMF to start negotiations with Ukraine on aid program

WASHINGTON (Reuters) - An International Monetary Fund team in Kiev will begin negotiations with Ukrainian authorities about an economic reform program, the IMF's chief said on Thursday.

"Following an informal briefing today of the IMF's executive board, (IMF) management has asked the team to stay in (Kiev) and begin a process of negotiation," IMF Managing Director Christine Lagarde said in a statement. She said the mission should finish its work by March 21.

The IMF team has been in Kiev since March 4 to gather data about the government's finances, and Lagarde met with Ukrainian Prime Minister Arseny Yatseniuk on Wednesday.

Officials in Ukraine, where pro-European politicians have taken charge after Russian-backed President Viktor Yanukovich was toppled in February following months of demonstrations, have said the country is nearing bankruptcy.

IMF support is widely seen as critical to Kiev's finances and to getting its economy on a growth track. Ukrainian officials have asked the IMF for at least $15 billion in assistance. IMF spokesman Gerry Rice said on Thursday it was too early to discuss specific figures.

"The team will work with the Ukrainian authorities to develop an economic reform program that will result in sound economic governance and sustainable growth, while protecting the vulnerable in society, and that can be supported by the IMF in accordance with its policies," Lagarde said.

IMF aid programs typically are accompanied by stringent conditions to ensure that a country will be able to fix its economy and make it grow. Canada, the European Union, the United States and other countries have promised to support Ukraine if an IMF program is put into place.

However, U.S. lawmakers are unlikely to vote on a Ukraine aid bill until later this month, held up by debates on whether IMF reforms should be included in the package.

The IMF's last loan program to Ukraine for $15 billion went awry when the government failed to implement reforms.

In the past, the IMF has asked Kiev to cut its large fiscal deficit, float its exchange rate, and phase out costly energy subsidies. Similar conditions are expected to be attached to any new IMF bailout package.

But some analysts have questioned the new government's ability to carry out unpopular reform measures. Ukraine's new government is dealing with political turmoil, including the possible annexation of the Crimea region to Russia following a referendum set for Sunday.

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