Putin says leaders have agreed on Ukraine cease-fire

A cease-fire between Russia and Ukraine has been agreed upon, starting Sunday, Russian President Vladimir Putin said Thursday.

Putin said both leaders had agreed on withdrawal of heavy weapons from the east Ukraine region affected by the conflict between pro-Russian separatists and the Ukraine military.

Speaking after almost 16 hours of talks in Minsk which were brokered by the leaders of France and Germany, Putin told reporters: "We have managed to agree on the main issues," adding that a cease-fire would come into effect Sunday.

He said Ukraine agreed to constitutional reform with control over the Russia-Ukraine border to be agreed upon with separatist leaders. The ruble gained ground on announcement, up 1 percent against the dollar and the RTS index rose 5.6 percent.

Ukraine President Petro Poroshenko said Kiev would reassert control of the joint border with Russia by the end of 2015. He said the peace deal did not include federalization or autonomy status for pro-Russian rebels. He said the peace deal called for the withdrawal of all foreign forces in Ukraine.

France President Francois Hollande said the truce was a relief for Europe. The pan-European Euro Stoxx 600 Index was trading 0.5 percent higher mid-morning Thursday.

Just minutes earlier, the head of the International Monetary Fund, Christine Lagarde, announced an "ambitious" aid package for Ukraine on Thursday while the outcome of separate peace talks between Kiev and Moscow remain uncertain.

"The program with Ukraine is a very ambitious one and is not without risks," Lagarde told CNBC in Brussels.

The IMF announced a funding package—including contributions from the European Union—for Ukraine worth around $40 billion Thursday. Around $17.5 billion of that aid will come from the IMF, Lagarde said, and the financing package will be spread over a four-year period.

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The country is struggling as a result of ongoing conflict with pro-Russian separatists in the east; its currency, the hryvnia, has fallen over 100 percent against the dollar in the last six months.

Lagarde told CNBC that Ukraine had demonstrated that it had an "appetite for economic reform," having made progress on fiscal policy, energy prices and in acting against corruption.

She added that although there were risks to the aid program, it was designed in such a way that there were "buffers to accommodate a difficult situation"—such as the conflict with Russia.

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Timothy Ash, head of emerging markets research at Standard Bank, said in an email that the aid was designed to send a message to Putin and was "a reflection of Western backing for Ukraine."

"The reality is that the West has been so slow with its support," Ash wrote.

CNBC's Julia Chatterley conducted the interview with Christine Lagarde and Reuters contributed to this report.