IMF board member says Fund taking big risks with Ukraine loan

The IMF executive board completed the combined fifth, sixth and seventh reviews of Cyprus's program and approved the disbursement of 278.4 million euros (AFP Photo/Saul Loeb)

Washington (AFP) - Brazil's representative at the International Monetary Fund has warned that the Fund risked making the "same mistake" with its rescue loan to Ukraine as it did in Greece.

The Fund's $17 billion loan program for Kiev set in April "is flawed, or questionable at least," said Paulo Nogueira Batista, executive director in the IMF for Brazil and ten other countries, in a statement to the board obtained Tuesday by AFP.

Speaking on his own behalf last week as the board met to release more funds to Ukraine, Nogueira Batista noted that the first IMF-European Union bailout plan for Greece foundered in part because the restructuring of the country's huge debt was undertaken at the beginning.

A second, larger program in 2012 included the restructuring of $260 billion worth of Athens' debt.

"Is the Fund not yet again avoiding or unduly delaying the issue of debt restructuring?" he asked the board.

"In a recently published document, the Fund noted that debt restructurings are often 'too little and too late', thus failing to re-establish debt sustainability and market access in a durable way. Is the same mistake being repeated now in Ukraine?"

Nogueira Batista suggested that, with Ukraine as with Greece, the Fund's was working with "hopes" rather than "facts."

"The success of this program heavily depends on a political solution for the fighting in the East of Ukraine; which will require cooperation -- rather than confrontation -- between Kiev and Moscow."

Earlier Tuesday, representatives of the IMF's Ukraine program said that if the conflict with pro-Russia rebels is not resolved soon, Kiev could need many billions of dollars more in aid.

The country's economy is already forecast to contract by 6.5 percent this year, much more than was anticipated earlier in the year.

In relation to the size of the economy, Ukraine's debt level is still smaller than Greece's. The IMF's newest projections are that the debt will rise from 40.9 percent of GDP last year to 73.4 percent next year.

Greece's debt burden though hit 170 percent of GDP in 2012.

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