IMF chief Christine Lagarde tells Ukraine to fix graft or lose vital aid

IMF chief Christine Lagarde warned Ukraine on Wednesday that its stalled fight against corruption and inability to push through required restructuring measures were jeopardising the future of the Fund`s rescue plan.

The stark message came a week after Ukraine`s reform-minded economy minister resigned in protest at alleged influence-peddling and graft by the former Soviet country`s new pro-Western leadership.

The International Monetary Fund last year approved a $17.5-billion (15.6-billion-euro) loan for the cash-strapped and war-scarred nation in a bid to support its new westward direction by breaking Kiev`s dependence on Moscow`s financial help.

But Ukraine has only received $6.7 billion of that assistance and Fund officials are expected to delay disbursing new tranches until the Ukrainian government confirms in writing what precise economic streamlining measures it intends to take.

"I am concerned about Ukraine`s slow progress in improving governance and fighting corruption, and reducing the influence of vested interests in policymaking," Lagarde said in an unusually strongly-worded statement.

"Without a substantial new effort to invigorate governance reforms and fight corruption, it is hard to see how the IMF-supported program can continue and be successful," she cautioned.

Lagarde added that "Ukraine risks a return to the pattern of failed economic policies that has plagued its recent history."

Western frustration has been fanned by the fact that Economy Minister Aivaras Abromavicius was the fourth reform-minded official to tender his resignation since Ukraine`s new leadership set off on its task on modernising the country in 2014.

Ukrainian President Petro Poroshenko and Prime Minister Arseniy Yatsenyuk held an emergency late-night meeting last Thursday that saw most of the disgruntled officials withdraw their resignation papers and vow to work as a unified team.

But the economy minister stuck to his guns and threatened to disclose further unsavoury details about how people close to the president were abusing their office and trying to seize the cash flows of Ukraine`s energy and defence sectors.US Ambassador to Ukraine Geoffrey Pyatt tweeted that Lagarde`s warning gave "further argument... for completing reload of Ukraine`s reformer-led government and zero tolerance for corruption."

The Ukrainian prime minister responded to the blunt message from two of Kiev`s most important partners by swearing to never revert to the country`s bureaucratic and and painfully-inefficient Soviet past.

"We will not permit a return of all the old Ukrainian rules," Yatsenyuk told a meeting attended by foreign security and justice officials.

"The recent political games could cost our country dearly," said Yatsenyuk.

"We will only get help when the whole world sees that we are helping ourselves and moving our country forward."

Ambassador Pyatt praised the prime minister`s comments and stressed that the "US will stand with Ukraine as it continues on the difficult path of reform."

Poroshenko had earlier expressed the hope of receiving the next $1.7-billion slice of the IMF loan later this month.

But Ukraine`s finance ministry said it was still working on the wording of a draft text that would later have to be approved by the IMF`s board in Washington.

It was not immediately clear what the snag in negotiations was about.

Yet it meant that the likelihood of the money being disbursed in the coming weeks was running low.