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IMF urges Kiev on corruption and pensions after new aid

By Natalia Zinets and Matthias Williams

By Natalia Zinets and Matthias Williams

KIEV (Reuters) - The International Monetary Fund urged Ukraine on Monday to raise the pension age and do more to tackle corruption after announcing the payout of $1 billion in new aid to the war-torn country.

The IMF is propping up Ukraine's economy with a $17.5 billion bailout, helping it climb out of recession following the annexation of Crimea by Russia in 2014 and the outbreak of a Russian-backed separatist insurgency in its industrial east.

Ukraine's President Petro Poroshenko and the government cheered the new aid as a vindication of their reform efforts. Prime Minister Volodymyr Groysman said it would help attract global investors and keep the hryvnia currency stable.

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But the Fund, while praising Ukraine's economic recovery and lower inflation, urged the authorities to implement structural reforms and tame high public debt.

"Corruption needs to be tackled decisively. Despite the creation of new anti-corruption institutions, concrete results have yet to be achieved," IMF First Deputy Managing Director David Lipton said in a statement.

"The urgency of structural fiscal reforms to ensure medium-term sustainability has increased, as pressures to raise wages and pensions are building," he said. "Ukraine cannot afford to delay comprehensive pension reform much longer, including by raising the effective retirement age."

Lipton also said it was important for Ukraine to safeguard the independence of the central bank. Central Bank chief Valeriia Gontareva has hinted that she might soon resign, citing protests that included someone leaving a coffin at her door.

Kiev is expecting a total of four tranches of aid this year. So far, counting Monday's aid, it has received $8.38 billion in total under the program launched in 2015.

Finance Minister Oleksandr Danylyuk said the next tranche could come in May.

The IMF had delayed its decision on disbursing new aid from March in order to assess the impact of an economic blockade that Kiev imposed on separatist-held territory.

Gontareva called the new aid "a real vote of confidence by the international financial community".

The central bank in a statement also said, citing IMF experts, that the blockade would have only a moderate impact on growth and would not threaten Ukraine's inflation target.

Earlier on Monday Ukraine launched an electronic register that will automatically refund value-added tax (VAT) owed to exporters, implementing an IMF-backed reform aimed at tackling endemic bribe-taking in the tax service and improving the investment climate.

(Editing by Alison Williams)