Ukraine's interim Prime Minister Arseniy Yatseniuk has warned that the country's GDP could shrink by 10% and that Ukraine is likely to default this year, if IMF reforms are not adopted.

The International Monetary Fund has announced that it will bail out the struggling eastern European state, providing somewhere in the region of $14-$18bn.

The package could extend up to $27bn over the next two years, if Ukraine plays ball and adopts the IMF austerity measures.

"The mission has reached a staff-level agreement with the authorities of Ukraine on an economic reform program that can be supported by a two-year Stand-By Arrangement (SBA) with the IMF," said the IMF in a statement.

"The financial support from the broader international community that the program will unlock amounts to $27 billion over the next two years. Of this, assistance from the IMF will range between $14-18 billion, with the precise amount to be determined once all bilateral and multilateral support is accounted for."

Ukraine's economic woes include a mountain of debt, much in the form of unpaid gas bills, and a currency that has plunged nearly 25% against the dollar this year.

The agreement is subject to approval by IMF management and the executive board, which will consider it in April.

"Following the intense economic and political turbulence of recent months, Ukraine has achieved some stability, but faces difficult challenges," the IMF statement said.

The interim government says that Ukrainian consumers will have to pay much more for their gas as part of the deal, putting an end to years of massive government energy subsidies.

Yatseniuk also warned that the price of Russian gas could almost double from April 1, reaching $480 (£288) per 1,000 cubic metres.

Not one to mince his words, the interim Prime Minister recently referred to his cabinet as "political kamikaze", and stressed that he's willing to embrace the unpopularity that will result from pushing through austerity measures.

The stringent conditions that accompanied IMF money in many Western European countries led to massive protests and political crises. Governments in Greece, Spain and Italy fell after implementing IMF austerity programmes over the past few years.