IMF 'very close' to agreement on Ukraine bailout, Lagarde says

[KIEV] The International Monetary Fund is "very close" to an agreement to bail out Ukraine's war-damaged economy, managing director Christine Lagarde said.

Ms Lagarde, speaking to reporters in Brussels after Wednesday's meeting of European finance ministers, didn't elaborate and said she'll give further details at a press conference at 9am on Thursday in the Belgian capital.

Ukraine's prime minister Arseniy Yatsenyuk and US Treasury officials have also indicated that agreement on an international bailout may be close.

The former Soviet republic of more than 40 million people is struggling to stabilize its economy after almost a year of conflict with pro-Russian separatists. Talks in Minsk between the leaders of Ukraine, Russia, Germany and France on a cease- fire to end the fighting extended into the early hours of Thursday.

Ukraine's central bank forecasts that the economy will shrink as much as 5 per cent this year, after a 6.7 per cent decline in 2014. The government is seeking to extend a US$17 billion IMF bailout to cover debt redemptions coming due this year and shore up foreign reserves.

Mr Yatsenyuk's government has promised changes to the economy to boost growth and raise living standards that have lagged those in Ukraine's more prosperous neighbours such as Russia and EU members Poland and Slovakia.

"Last year we executed all the reform criteria defined by our international lenders," the premier said at a government meeting in Kiev.

CURRENCY SLUMP

Ukraine is also trying to shore up the hryvnia, the world's worst performer this year with a 39 per cent drop against the dollar. It extended losses on Wednesday, falling 1.5 per cent to 26 per dollar.

Ukraine allowed the currency to weaken last week to boost the chances for an IMF deal.

Ukraine also plans to speak to the holders of its bonds at the beginning of March once the IMF talks conclude, Finance minister Natalie Jaresko said in a Bloomberg TV interview on Wednesday.

A first loan tranche from the new bailout may arrive in early March, Jaresko said. She added that markets have overshot on the hryvnia and an IMF funding deal will bolster the currency.

Ukraine needs about US$15 billion of fresh funding to stay afloat, the finance minister said on Feb 3.

BLOOMBERG