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Published: Friday August 29, 2014 MYT 6:40:02 PM
Updated: Friday August 29, 2014 MYT 6:41:07 PM

Ukraine in critical need of second IMF aid tranche - PM

KIEV (Reuters) - Ukrainian Prime Minister Arseny Yatseniuk urged the International Monetary Fund on Friday to release the next tranche of a $17 billion loan and bemoaned the heavy cost of fighting a pro-Russian rebellion in the east.

Ukraine has complied with conditions for the two-year aid package, which is intended to shore up depleted foreign currency reserves and support the state budget, but the country faces risks due to the eastern conflict, the IMF has said.

Ukrainian troops and pro-Russian rebels have been fighting since April in the heavily industrialised regions of Donetsk and Luhansk, which together contributed nearly 17 percent of Ukrainian gross domestic product in 2013.

"The (revenue) that we haven't been receiving from Donetsk and Luhansk is miniscule compared with the billions we are spending on war," Yatseniuk said at a government meeting.

"For us it is critically important to get a positive decision from the IMF and we've done everything (to achieve) this," he said.

The ex-Soviet republic received a first tranche of slightly more than $3 billion in May and the IMF board will meet later on Friday to decide whether to approve the next disbursement, likely to total $1.4 billion.

Analysts have said the Ukrainian economy will slide deeper into recession this year, despite the IMF aid deal, as the rebellion cripples activity in the industrial east and scares off foreign investors.

During its last visit to Kiev in July, the IMF downgraded its growth forecast for this year to a 6.5 percent contraction, from 5 percent previously.

(Reporting by Pavel Polityuk; Writing by Alessandra Prentice; Editing by Crispian Balmer)

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