The IMF yesterday approved a four-year, $17.5 billion arrangement for Ukraine, their contribution to a $40 billion financing gap that they have identified over that period. A further $15 billion is to come from a restructuring of private debt, with formal negotiations expected to begin soon. The rest is expected to come from governments and other multilateral agencies. An ambitious array of reforms—including to fiscal and energy policy, bank reform, and strengthening the rule of law—are laid out, signaling a dramatic break from past governments. These measures are expected to set the stage for recovery: output falls 5 ½ percent this year before 2 percent growth returns in 2016, inflation will average 27 percent this year and then decline, while the current account deficit falls to 1 ½ percent and the currency stabilizes around current levels. Public sector debt will peak at 94 percent of GDP in 2015 as the program takes hold. All this depends on an end to the current hostilities, which as the IMF notes remains a considerable risk to the program.
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