FX.co ★ EU and IMF lavish with loans to Ukraine

The floodgates of money to Ukraine from the West are now crack-opened. While the country shook by a political crisis is trying to find common ground with its eastern part, the EU’s officials start to fulfill its promises. Nobody intended to provide military support, but why not lend some money; all the more so when there is a global credit boom.

Siim Kallas, Vice-President of the European Commission reported a successful transfer of €100 million – the first part of a €1.6 billion loan tranche. To get the rest of the aid package, the Ukrainian Parliament must complete ratification of the memorandum of understanding and the loan agreement.

In addition to credit obligations, the Kiev government will have to carry out some economic reforms and considerably reduce government spending under the watchful eye of the European Union's special task-force. The latter plans to check out each stage of the reforms; if successful, Ukraine will receive the whole aid package by 2015. The EU is not the only major creditor of today’s Ukraine. The International Monetary Fund made hay of the crisis and was there to provide the first tranche of $3.19 billion under a two-year stand-by arrangement.

To get a financial aid is a no-brainer. However, experts say serious economic problems are imminent. The Ukraine’s GDP has already dropped 2.8% on year after rising 3.3% in the final quarter of 2013. "On the whole, we are moving in line with our targets. This year GDP is seen at minus 3%. Next year we project economic growth at plus 1.7%, an absolutely realistic forecast," First Deputy Economic Development and Trade Minister of Ukraine Anatoly Maksyuta said.