IMF in talks with Ukraine leaders on bailout plan

International Monetary Fund chief Christine Lagarde held discussions Friday with Ukraine's leaders about the impact of recent political turmoil on the nascent IMF rescue program, the Fund said.

Lagarde spoke by telephone with President Petro Poroshenko and Prime Minister Arseniy Yatsenyuk, a brief statement said.

"The discussions focused on the implications of the recent political developments in Ukraine for economic policies, in particular for the authorities' ability to implement the program that is being supported by a Stand-By Arrangement," it said.

"The managing director encouraged steady implementation of the authorities' reform program, including the policy package recently agreed with Fund staff."

Ukraine sought Friday to avoid a political crisis after the shock resignation of its prime minister, as fighting between the army and pro-Russian rebels close to the Malaysian airliner crash site claimed more than a dozen lives.

Poroshenko called on parliament to heed "cold reason" and pass a vote of confidence in the government, a day after Yatsenyuk walked out in fury over the collapse of his ruling coalition. His resignation has not been ratified by the parliament.

In late April, the IMF approved a $17.0-billion (12.7-billion-euro) two-year financial lifeline for Ukraine. The first installment of the aid, worth $3.19 billion, was disbursed in early May.

The IMF has given preliminary approval for a second tranche of $1.4 billion, on condition that the authorities continue to adopt the economic reforms demanded by the aid program.

A week ago, the IMF warned that the pro-Russia uprising engulfing Ukraine's vital industrial east had dealt a sharp low that would shrink it economy faster than feared.

The Fund projected the economy would contract by 6.5 percent, instead of the 5.0 percent initially estimated, because of revenue collection shortfalls in crisis-hit regions and higher spending on defense.