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24 Feb 2014
Ukraine ousts Yanukovych, faces tough economic times
FXStreet (Łódź) - The situation in Ukraine has been developing quickly over the weekend, as president Viktor Yanukovych was ousted on Friday by Parliament which then moved on to reinstating the 2004 constitution, and scheduling and early presidential election in May. Ukraine's former PM Yulia Tymoshenko was released from prison and her close associate and parliamentary speaker Oleksandr Turchynov was named interim president.
Meanwhile, Yanukovych tried to flee the country but was prevented from boarding a plane to Russia and recently a warrant for his, as well as a number of other officials arrest had been issued on charges of mass murder of peaceful civilians.
Even though the political changes in Ukraine are moving fast, Kiev still has to deal with Russia's opposition to the developments and with the dire economic situation it will find itself in if the powerful neighbor refuses to release the rest of the promised 15 billion dollar aid and does not reduce the price of gas it provides.
The EU has offered Ukraine substantial financial aid “once a political solution, on the basis of democratic principles, a commitment to reform and a legitimate government, is in place,” as European Commissioner for Economic and Monetary Affairs Olli Rehn said on Sunday at the G20 summit in Sydney.
IMF head Christine Lagarde also stated that the fund was ready to provide a rescue package, under the condition that the country carries out deep economic reforms, while US Treasury Secretary Jack Lew expressed the willingness of Washington to help restore democracy, stability and growth in Ukraine in cooperation with other countries.
"The IMF remains in the best position to help states like Ukraine deal with their economic challenges," Lew added.
According to Dmitry Polevoy from ING: “While Russia and EU/US should put Ukrainians’ interests above their political ambitions, this is easier said than done. We think that EU/US aid would likely come under standard reform requirements including higher UAH flexibility, fiscal adjustments, energy policy revision and political transformation. All this makes UAH still extremely vulnerable at current 8.95-9.00/USD and recent sovereign bonds rally unconvincing, especially given yields have only retreated slightly from all-time highs.”
Meanwhile, Yanukovych tried to flee the country but was prevented from boarding a plane to Russia and recently a warrant for his, as well as a number of other officials arrest had been issued on charges of mass murder of peaceful civilians.
Even though the political changes in Ukraine are moving fast, Kiev still has to deal with Russia's opposition to the developments and with the dire economic situation it will find itself in if the powerful neighbor refuses to release the rest of the promised 15 billion dollar aid and does not reduce the price of gas it provides.
The EU has offered Ukraine substantial financial aid “once a political solution, on the basis of democratic principles, a commitment to reform and a legitimate government, is in place,” as European Commissioner for Economic and Monetary Affairs Olli Rehn said on Sunday at the G20 summit in Sydney.
IMF head Christine Lagarde also stated that the fund was ready to provide a rescue package, under the condition that the country carries out deep economic reforms, while US Treasury Secretary Jack Lew expressed the willingness of Washington to help restore democracy, stability and growth in Ukraine in cooperation with other countries.
"The IMF remains in the best position to help states like Ukraine deal with their economic challenges," Lew added.
According to Dmitry Polevoy from ING: “While Russia and EU/US should put Ukrainians’ interests above their political ambitions, this is easier said than done. We think that EU/US aid would likely come under standard reform requirements including higher UAH flexibility, fiscal adjustments, energy policy revision and political transformation. All this makes UAH still extremely vulnerable at current 8.95-9.00/USD and recent sovereign bonds rally unconvincing, especially given yields have only retreated slightly from all-time highs.”