A $17 billion loan may not be enough for Ukraine to manage its finances if the conflict with Russia continues, the International Monetary Fund warned over the weekend.
All parties involved in the Crimean crisis must work together, “because it’s very hard to imagine how the finances of Ukraine can be kept under control [otherwise],” the group’s deputy managing director David Lipton told CNBC at the G-20 summit in Brisbane.
In April, the group agreed to a $17 billion two-year rescue package for Kiev with the aim of restoring macroeconomic stability. Yet that goal remains far off with the country in the midst of a currency crisis and facing an 8 percent contraction in gross domestic product (GDP) this year.
The hryvnia plunged to record lows against the U.S. dollar in recent days, slumping nearly 90 percent in value year-to-date. Meanwhile, the World Bank estimates that economic growth may only return in 2016.
“We are working with Ukraine to try and stabilize their economy, which has become destabilized by what’s happened, including this conflict. This program stabilization really is now under threat from the flaring up of conflict,” said Lipton. “We’ve been presuming that Ukraine and the separatists would make some progress after the ceasefire, [and] that Russia would co-operate with that.”