The head of an International Monetary Fund team visiting Ukraine gave a positive assessment of progress by Kiev on reform on Sunday and said there would be further discussion on loans that the near-bankrupt country badly needs.
The IMF mission came to Ukraine to review progress with conditions for a $17.5 billion four-year bailout program, and is expected to give recommendations to the IMF board in June.
A second tranche of about $2.5 billion hinges on the outcome of the visit. Ukraine, which is fighting a war in its east against Russian-backed separatists, sorely needs the cash to shore up foreign currency reserves.
In a statement issued by the Fund, IMF mission chief Nikolay Gueorguiev said "understandings" had been reached with the Ukrainian authorities on most issues during the May 12-29 visit.
He said "good implementation" of the reform program had been achieved by Kiev despite the unresolved conflict in the east and the IMF mission saw signs emerging that "economic stability is gradually taking hold".
"Understandings were reached on most issues and discussions will continue in the coming days to finalize a staff-level agreement that can be taken for approval to the IMF management and the Executive Board," Gueorguiev said.
He said the conflict in the east had taken a heavier toll than expected in the first quarter of 2015 and the Fund had accordingly revised downwards its growth projections and forecast end-of-year inflation at 46 percent.
The IMF statement made no reference to tough talks which are going on between Ukraine and a creditors' committee to agree new terms for repaying the country's huge debts, though the Fund has indicated it wants early progress on "restructuring".
About $23 billion worth of debt is earmarked for restructuring.
Ukraine needs restructuring to plug a $15.3 billion funding gap and says it will not be able to meet targets set out in the IMF-led rescue package without cutting the principal owed on bonds issued by previous Ukrainian governments.
But a creditors' committee, led by Franklin Templeton and representing about $9 billion of debt, resists the idea of a writedown -- or "haircut" -- of the bonds' principal.
It has put forward a plan which it says would save Ukraine $15.8 billion, or more than what it is aiming for, via extending bond maturities by up to 10 years and by cutting coupon payments in initial years, a source familiar with the situation told Reuters on Friday.
The finance ministry said on Friday night that restructuring talks were accelerating and the two sides would hold a teleconference on June 5 to assess progress after "intensified talks" between advisers in London.
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