IMF package for Ukraine "not enough", minister says

Reuters

* Ukraine appeals to donors to back "Marshall plan"

* Kiev plans rehabilitation programme for the east

* EU official says more funds depend on reforms

By Adrian Croft

BRUSSELS, July 8 (Reuters) - Ukraine's deputy prime minister told international donors on Tuesday that a $17 billion International Monetary Fund bailout was "not enough" because of "unprecedented Russian-inspired aggression".

Vice Prime Minister Volodymyr Groysman urged international donors at a meeting in Brussels to support a "Marshall Plan" for economic recovery that the government will present at a donors' conference expected to be held in the autumn.

The IMF approved a $17 billion two-year aid programme for Ukraine in April to help the former Soviet republic's economy recover after months of upheaval, unlocking further credits from other donors of about $15 billion. Ukraine's economy has stagnated for the past two years and the government has said it is likely to shrink by 3-5 percent this year.

"Today Ukraine is confronted with new challenges that cannot be solved in a standard fashion," Groysman told the meeting, through an interpreter.

"The International Monetary Fund package has helped recovery, but today this is not enough, in that we have unprecedented aggression on behalf of the Russian Federation."

The aggression was not only military, but also in the economic and energy fields, he said.

Moscow has vowed to raise trade barriers in response to Ukraine entering a free trade agreement with the EU, and the state-controlled Russian gas exporter Gazprom has cut off supplies to Ukraine in a dispute over pricing and non-payment of debts.

Groysman said Ukraine had drawn up a three-year plan for recovery and growth for 2014-16, "a kind of Marshall Plan for Ukrainians", referring to U.S. reconstruction aid for Europe after World War Two.

"Stabilisation and renewal and return to economic growth is most important for us. We call upon the donors to participate in this new plan of growth and recovery," he said.

RECOVERY AND GROWTH AGENDA

Donors agreed to help Ukraine to develop the plan, called the Economic Recovery and Growth Agenda, including potential sources of funding, according to a joint statement issued after the meeting.

Apart from EU countries, the United States, Canada, Japan, Norway, Switzerland and international financial institutions took part in Tuesday's meeting.

Donors including the European Union have previously pledged billions of dollars in loans and aid to help Ukraine, whose economy came close to bankruptcy earlier this year during a long political crisis triggered by then-president Viktor Yanukovich's decision to spurn the free trade agreement with the EU.

New president Petro Poroshenko, installed after Russia annexed Ukraine's Crimea region in March, moved closer to the EU by signing that agreement at the end of June.

Groysman said Ukraine planned a programme to modernise infrastructure and create new jobs in the area of eastern Ukraine where the army is battling an uprising by pro-Russian separatists.

He appealed for international help to diversify Ukraine's energy sources, reducing its reliance on Russian gas. The government would also combat corruption, he said.

The EU, which has promised Ukraine 11 billion euros ($15 billion) of loans and grants over the next seven years, has so far handed over 850 million euros, EU Enlargement Commissioner Stefan Fuele told the conference.

Fuele stressed that any further financial support from the European Union would depend on Ukraine pushing ahead with reforms, including constitutional reform, decentralisation and judicial reform.

"We also need to see further action on the economy, trade and business, and in the energy sector," Fuele said.

($1 = 0.7331 Euros) (Editing by Kevin Liffey)

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