Despite rampant inflation and only a recent recovery from recession, Ukraine will be able to eke out modest growth in 2016, Ukraine's finance minister told CNBC Thursday.
"What's of interest to me is that Ukraine continues to rebuild its strength," Natalie Ann Jaresko told CNBC on the sidelines of the World Economic Forum in Davos.
"We've turned the corner and I think this year, we're looking to see growth and even if it's slight growth, it's growth. Coming out of a recession, restoring stability and providing new jobs and new consumer purchasing power to the people (is the aim)."
Ukraine received a financial bailout worth $17.5 billion from the International Monetary Fund (IMF) in 2015 which is slowly being disbursed in tranches. The program required reforms and strict spending cuts by Ukraine. Still, the country is making progress having emerged from an an 18-month recession in the Fall.
Jaresko said most of the IMF's aid money went into the central bank's reserves and that staying in the IMF's program was "absolutely critical": "It provides that seal of good housekeeping to foreign investors and to our partners internationally."
As the country put its finances in order, Jaresko said the projected inflation target for Ukraine this year of 12 percent, was "very realistic." Last year's very high inflation rate (projected at 46 percent by the IMF) was due to a devaluation of the currency earlier in the year, she said, and a steep hike in communal tariffs, such as the price of gas for households.
That won't be repeated this year. We have shrunken the budget deficit tremendously and we have shrunken the state oil and gas company deficit to zero and so the inflationary pressures have receded tremendously."
Ukraine's financial position might be improving but relations with its neighbour Russia remain fragile. Tensions rose and violence flared between the two countries following Russia's annexation of Crimea from Ukraine in March 2014 and its role in a pro-Russian uprising in east Ukraine in 2014, although it denied any involvement.
Ukraine sees Russia's intervention as an incursion on its territory designed to destabilize the country's government and part of a strategy to reclaim Ukraine, which is a former part of the Soviet Union.
The conflict sapped Ukraine's already poor public finances and left Russia largely isolated on the global stage. Along with international powers, Ukraine placed sanctions on Russia which have hampered its economy.
Jaresko said Crimea's annexation was still a raw topic for Ukraine and that the country's president was keen to keep the spotlight on Crimea. "(The Ukrainian president) recently held a press conference where he talked about trying to begin a dialogue so that Crimea doesn't fall off the agenda, because this has never fallen off the agenda for Ukraine," she said.
The finance minister said the ongoing dispute with Russia over Crimea – currently in a state of what she called a "fragile ceasefire" as part of the Minsk peace agreement -- was complex.
"It's a very painful issue, it's a human rights issue, there are travel and energy issues – there's a lot to be done and obviously, eventually we'd like to have peace and we'd like to have our sovereignty and territorial integrity restored."
