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Ukraine may need bigger bailout if conflict continues in 2015: IMF

A Ukrainian serviceman rides in an armored vehicle near Donetsk, September 2, 2014.
Gleb Garanich | Reuters
A Ukrainian serviceman rides in an armored vehicle near Donetsk, September 2, 2014.

Ukraine may need as much as $19 billion in additional funds from donors if its conflict with pro-Russian separatists in the eastern part of the country continues in 2015, the International Monetary Fund warned on Tuesday.

Even under Kiev's current $17 billion IMF bailout, the Fund said Ukraine will not be able to meet all of its targets due to the ongoing fighting and an intensified gas dispute with Russia, which supplies the bulk of Ukraine's natural gas needs.

Read More Ukraine's Poroshenko says close to point of all-out war with Russia

But the money planned under the program is largely sufficient for now as long as the fighting between the government in Kiev and the rebels subsides in the 'coming months,' the IMF said in a detailed review of Ukraine's progress and the state of its economy.

The IMF report painted a dire picture of a country trying to reform everything from banking management to the legal system, while also boosting spending on fighting in the eastern regions of Donetsk and Luhansk.

Those regions together accounted for 23 percent of Ukraine's industrial production and 14.5 percent of its retail trade in the first quarter.

Read MoreUkraine: Why you should really be worried this time

The Fund, which provided a bailout to Kiev as part of an overall $27 billion international rescue, said it would relax some conditions for Ukraine going forward, including for the government's budget deficit.

In return, Kiev would have to make up for the shortfall elsewhere, including by doing a better job of collecting payments for Naftogaz, the state-run oil and gas company.

The IMF also warned that Ukraine's reforms may become more difficult if the country calls early elections.

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The Fund on Friday confirmed Kiev was on track with most of the loan's conditions so far, allowing the disbursement of $1.7 billion. It said the next disbursement, of about $2.7 billion, would come in mid-December if Kiev complies with the loan conditions.

—By Reuters

Contact Europe: Economy

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