July 18, 2014 8:53 a.m. ET
WASHINGTON—The International Monetary Fund Friday gave the green light to the next tranche of bailout funding for Ukraine, but warned that fighting in eastern Ukraine risked capsizing the emergency financing.
The IMF approved the $17 billion bailout in late April, part of a $30 billion international emergency financing agreement meant to prevent a collapse of the economy after the ouster of the pro-Russian government in February. The staff-level approval of the $1.4 billion tranche still requires approval by the IMF's executive board, which is all but a formality.
The conflict between government forces and pro-Russian militants is a major drain on the country's finances, forcing Kiev to take additional budget belt-tightening measures. The IMF said the economy is now expected to contract by 6.5% this year, rather than the previously forecast 5%.
"The program hinges crucially on the assumption that the conflict will begin to subside in the coming months," the IMF said in a statement.
IMF staff said that "a significant prolongation of the crisis would seriously strain" the government's ability to meet the program targets "without a substantial increase in external support on adequate terms."
Write to Ian Talley at ian.talley@wsj.com
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