Ukraine came closer on Saturday to winning a bailout from the International Monetary Fund as an IMF mission said it would recommend lending $14.9 billion in a deal to help fill Ukraine's budget gap and boost investor confidence.
The final sum came in at slightly lower than expected as the mission had been discussing a new stand-by facility worth up to $19 billion in negotiations that dragged on for months.
The IMF said in a statement its board would review the program at the end of July after Ukraine makes agreed adjustments to its budget and financial sector. If approved, the program would last two and a half years.
Policies under the program include fiscal adjustment to contain the 2010 consolidated general government deficit to 5.5 percent of GDP ... and 3.5 percent in 2011 with a view to setting public debt firmly on a declining path, it said.
The fiscal adjustment is to be achieved by tax and social security structural reforms, expenditure rationalization, combined with efforts to improve tax administration.
The statement came a day after U.S. Secretary of State Hillary Clinton said the United States hoped Ukraine would win the deal.
The IMF last year suspended Ukraine's $16.4 billion rescue program because the former administration of President Viktor Yushchenko, who was at odds with his government, reneged on promises of financial restraint.
Talks on a new stand-by facility have been prolonged as the IMF urged the government to set more ambitious fiscal tightening targets.
The new government of President Viktor Yanukovich adopted the 2010 budget with a deficit target of 5.3 percent of gross domestic product and has said it would reduce the gap by 1 percentage point a year.
The IMF had indicated it wanted Ukraine to set more ambitious targets for cutting the budget deficit -- which would probably require unpopular measures such as hiking utilities tariffs and reducing pensions or raising the retirement age.
As well as providing much-needed cash, a new deal would help restore investors' confidence and give a boost to Ukraine's planned $1.3 billion Eurobond issue, analysts say.
(Reporting by Dmitry Zhdannikov; Editing by Susan Fenton)