The International Monetary Fund (IMF) has reached a staff-level agreement with Ukraine to provide additional funding for the warn-torn country to restructure its economic.

Under its Extended Fund Facility, the IMF will provide a $17.5bn (£11.5bn, €15.5bn) loan to Ukraine to stabilise Ukraine's economy, restore growth and improve living standards.

"This new four-year arrangement would support immediate economic stabilization in Ukraine as well as a set of bold policy reforms aimed at restoring robust growth over the medium term and improving living standards for the Ukrainian people," Christine Lagarde, managing director of the IMF, said in Brussels.

"It is an ambitious program; it is a tough program; and it is not without risk. But it is also a realistic program and its effective implementation—after consideration and approval by our Executive Board--can represent a turning point for Ukraine."

Nevertheless, Ukrainian Prime Minister Arseniy Yatseniuk said that the aid package included terms that are "very difficult". The deal requires Kiev to cut spending, restructure banks and fight corruption.

In addition, the country will have to keep nominal wages and pensions fixed along with increasing the "progressivity of the personal income tax and streamlining the tax system".

The new deal will replace the $17bn loan programme announced by the IMF in April, of which $4.5bn was disbursed.

IMF noted that its funding will be complemented by other bilateral and multilateral financing. From these various sources taken together, a total financing package of around $40bn is estimated over the four-year period.

Lagarde noted that the funding programme is based on conservative macroeconomic assumptions to buffer further the impact of the conflict in the East.

"Of course, resolution of the conflict, so critical for people, would also strengthen and speed up prospects for macroeconomic stabilization and growth," she said.

The announcement came as Ukraine's President Petro Poroshenko and Russian President Vladimir Putin along with German Chancellor Angela Merkel and French President Francois Hollande agreed on a ceasefire in eastern Ukraine.