Petro Poroshenko
Ukrainian President Petro Poroshenko holds a fragment of a bus body as he addresses the World Economic Forum in DavosReuters

Ukraine has requested an improved four-year financial aid package with the International Monetary Fund as it seeks to avoid defaulting on its debt.

Officials at the World Economic Forum in Davos said they hope a deal can be finalised by the end of January.

Ukraine said it will seek to improve borrowing terms with its creditors, after it met with the IMF to finalise terms of a new aid package.

"We'll reach out to our sovereign creditors and talk to them about their vision, our vision, how we can work together to improve the debt sustainability in the medium-term," said Ukraine's finance minister Natalie Jaresko.

Analysts have noted that Jerasko suggests that Ukraine would seek to restructure the country's mounting debt.

IMF managing director Christine Lagarde backed the signing of an extended fund facility that would supersede a previous bailout deal agreed in 2014.

Ukrainian government bonds sank to their lowest level on record on the back of the announcement, having already weakened because of increasingly intense fighting in eastern Ukraine.

Prices for the 2017 bond have almost halved since last summer, as the country's central bank burned through its reserves.

While the announcement suggests that the country is nearing a resolution to its current crisis, investors are set to lose out as Kiev seeks to restructures its debt under more favourable terms.