The International Monetary Fund today announced a $14-$18 billion bailout for Ukraine to avert bankruptcy for the crisis-hit country amid its escalating standoff with Russia.

The agreement in principle, worth the equivalent of €10.8-13.1 billion, is tied to tough reform conditions which will have a big impact on the Ukrainian economy and people. 

The Fund's Ukrainian mission chief Nikolai Georgiyev said the rescue would form the central part of a broader package released by other governments and agencies.

This would amount to $27 billion (€19.6 billion) over the next two years.

Georgiyev said the actual size of the "standby agreement" would be determined only once the new Western-backed leaders of Ukraine implemented the reforms the Fund had sought in vain from the cabinet of Kremlin-backed president Viktor Yanukovych.

That government was toppled in February by three months of protests.

"The programme will be approved by the IMF board when the steps that I mentioned are implemented," Georgiyev told reporters after holding a decisive round of talks with Ukrainian President Arseniy Yatsenyuk yesterday.

The package announced by the Fund is only slightly smaller than that $15-20 billion (€10.9-14.5 billion) requested by the former Soviet state's new leaders when Georgiyev's mission first arrived in Kiev on March 4.

The Fund has made an immediate end to Ukraine's costly gas subsidies one of its main conditions for the programme's approval.

It also wants the central bank to stop propping up the Ukrainian currency and for the government to cut down on corruption and red tape.

Georgiyev called these two steps as a more committed effort to fight bureaucratic red tape and state corruption "the foundation for stable and sustainable growth".

The IMF programme was announced one day after the Ukraine's state energy company Naftogaz said it would increase domestic heating gas prices by 50% on May 1. 

Naftogaz added that rates for district heating companies would go up by 40% on July 1 and that further rate increases were likely in the coming years.

Ukraine's central bank has already limited its currency interventions - a decision that has seen the hryvnia lose more than a quarter of its value against the dollar since the start of the year.

The IMF programme's formal approval in April will set in motion the release of further assistance from both Washington and the European Union.

Yatsenyuk said he expected European Union officials to send €1.6 billion to Kiev within two months of approval of the loan deal.

The US has also pledged $1 billion (€720m) in loan guarantees while Japan has promised up to $1.5 billion (€1.1 billion).

Economist believe that the IMF decided to move faster than it may have initially wanted out of concern that the Ukrainian government could become insolvent within a matter of months.

Ukraine's fast-depleting reserves - spent the previous years on propping up the currency at artificially high rates in order to avoid public discontent - had reached levels sufficient to cover just two months of imports. It also owes billion of dollars in foreign debt payment coming due within the next few months.