Its decision, after a 13-month delay due largely to concerns on corruption, also frees the US to guarantee $1 billion of Ukrainian bonds to be sold on international markets and a €600 million EU loan.

The IMF chief, Christine Lagarde, said in a statement that there had been “welcome signs of recovery” in the economy and “bold steps” on reform, for instance, making people pay normal prices for energy.

She added that “much remains to be done, including combating corruption,” as well as recapitalising banks and filling a hole in pension funds.

The Ukrainian economy had shrivelled by 16 percent in the past two years, but grew 0.7 percent in the first half of this year.

Its finance minister, Oleksandr Danylyuk, said on Thursday the IMF cash would be used to repay debts and stabilise the hryvnia, calling it a sign of “confidence”.

The European Commission will, at an event in Kiev on Friday, unveil a separate €16 million scheme to help tackle corruption.

EU states are also preparing to grant Ukrainians visa-free travel, in a decision expected next month.

Cease-fire

The IMF news came the same day that the leaders of two Russia-occupied regions in east Ukraine, Alexander Zakharchenko and Igor Plotnitsky, announced a seven-day truce starting midnight.

One day earlier, international monitors, the OSCE, had recorded 275 explosions in the Donetsk region alone, with media reports of six deaths.

Ukrainian president Petro Poroshenko, who met the French and German foreign ministers in Kiev on Wednesday, agreed to match the truce.

Germany’s Frank-Walter Steinmeier said: “We came to Kiev with the pledge from Moscow that the separatists' weapons will fall silent at midnight”.

“We are glad that Ukraine will also respect the ceasefire … It would be a big step forward, plus open a window of opportunity, if weapons stayed quiet for seven days”.

The British and Polish foreign ministers, in separate initiatives, also visited Kiev on Wednesday.

With EU leaders to shortly discuss whether to maintain Russia economic sanctions, the UK’s Boris Johnson said: “The crucial thing now is that we maintain sanctions”.

“Brexit or not, it makes no difference to us … We continue to be a major player, as I've always said, in common foreign and security policy. It's inconceivable that the UK would not be involved in that kind of conversation about sanctions”, he said.

'Internal enemy'

For her part, Nadyia Savchenko, a Ukrainian MP and former soldier who had been, until recently, held captive by Russia, also urged the EU to uphold sanctions while visiting Brussels last week.

She said the EU should organise a humanitarian mission of doctors and lawyers to visit prisoners being held by both sides.

Amid a brewing controversy over the EU’s €16-million scheme, she told EUobserver: “We have a problem with corruption. We don’t hide it. We say it openly that it is our main internal enemy”.

The EU scheme has come under fire because Johannes Hahn, an EU commissioner, is to launch it at the so-called Yes business conference, which is sponsored by Viktor Pinchuk, an oligarch.

Daria Kaleniuk, a leading anti-corruption campaigner, told this website: “I wouldn't go [to Yes] even if I were invited because of Pinchuk”.

A Ukrainian official dealing with corruption issues, who asked to remain anonymous, said: “It’s not a good idea for an EU official [Hahn] to present an anti-corruption project during an event organised by an oligarch. Oligarchs are the leaders of Ukrainian corruption”.