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Ukraine won approval from the International Monetary Fund for the next installment of its $17.5 billion bailout as the country tries to climb out of a recession and negotiate a debt restructuring with creditors.

The fund’s executive board on Friday approved a disbursement of $1.7 billion after the first review of the program, the IMF said in a statement. The latest tranche brings to $6.7 billion the amount released to Ukraine so far under the March agreement, it said. The funds are expected to be disbursed “in the coming days,” the country’s Finance Ministry said in a separate statement.

IMF First Deputy Managing Director David Lipton said in a statement that while the Ukrainian economy remains fragile, “encouraging signs are emerging.”

“In recent months, the exchange rate has stabilized, domestic-currency retail deposits have been increasing, and the pace of economic decline is moderating,” he said.

Ukrainian officials need to sustain the reform momentum after a “strong start” implementing the conditions of the bailout, Lipton said. Keeping monetary policy tight and building up official currency reserves will be “critical” to stabilizing capital flows and anchoring inflation expectations, he said.

Creditor Talks

The government and a group representing creditors agreed in a joint statement July 16 to work on “narrowing the gaps” between their proposals after meetings in Washington attended by Finance Minister Natalie Jaresko.

Lipton urged Ukraine to reach a debt deal before the next review of the loan program. However, he reiterated that the fund can continue lending to Ukraine even if talks with creditors stall.

In a separate statement, U.S. Treasury Secretary Jacob J. Lew encouraged Ukraine and its creditors to reach a “timely agreement” that satisfies the criteria laid out by the IMF, which include reducing public debt to gross domestic product to 71 percent by 2020.

Lawmakers in Kiev this month passed laws on utility prices, anti-corruption efforts, deposit guarantees and improvements in the ability of the state energy company to collect receivables.

After completing a staff mission to Ukraine in May, IMF officials reduced their economic projection for the country to a contraction in GDP of 9 percent this year.

(Updates to include Lipton, Lew statements in third, eighth paragraphs.)