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Ukraine conflict is draining economy, hampering reforms: PM Yatseniuk

21 August 2014 01:05 (UTC +04:00)

Baku-APA. Ukraine's conflict with separatist rebels is draining the economy by the day and hampering efforts to implement reforms as required by an IMF bailout programme, Prime Minister Arseny Yatseniuk said on Wednesday, APA reports quoting Reuters.

According to the terms of a $17 billion International Monetary Fund loan package, Ukraine must implement set reforms, but the country, which is virtually bankrupt and running wide external deficits, has had to divert substantial funds in its fight to contain the pro-Russia insurgency.

Attacks by separatists on the infrastructure of the industrial east - mines, power stations, railways and bridges - were intended to strangle the economy, Yatseniuk told a government meeting.

"We're losing economic potential by the day ... Russia is aware that rebuilding the Donbass (the industrial east) will cost not millions but billions of hryvnia," he said.

Ukraine's economic decline has accelerated since the pro-Russian rebellion erupted in April when rebels set up separatist republics in its Russian-speaking east after political upheaval in Kiev led to the ousting of a Moscow-backed president and Russia's annexation of Crimea.

The economy contracted by 4.7 percent in the second quarter compared with the same period last year. With industrial output plummeting 12 percent in July, the economic outlook for the third quarter is not promising.

In June, Yatseniuk asked the IMF, which decides on the disbursement of the second tranche of $1.4 billion on Aug 29., to take into account the extra financial burden of fighting the insurgency.