IMF Approves Long-Delayed $2.8 Bln Loan To Crisis-Stricken Ukraine Amid Signs Of Stability

MOSCOW, Russia -- The International Monetary Fund on Friday approved a long-delayed $2.8 billion loan for crisis-stricken Ukraine, citing signs of growing political stability and more promising economic policies.
The impact of the global financial crisis on Ukraine has been compounded by its turbulent political climate, but the IMF said there have been indications of improvement."There is stability, which has been achieved in the last few weeks, (and) there is political consensus," Ceyla Pazarbasioglu, the IMF's mission chief in the ex-Soviet republic, said in a conference call with reporters.The IMF executive board's approval for the transfer of the much-needed second portion of a $16.5 billion loan package came after Ukraine agreed to reforms sought by the fund.The transfer approved Friday will bring IMF disbursements to Ukraine under the agreement to about US$7.3 billion.John Lipsky, acting chair of the IMF's executive board, said Ukraine's revised economic program "will restore confidence in the banking system and preserve fiscal sustainability, while protecting the most vulnerable segments of the population."The redesigned government program is aimed at maintaining a balance between mitigating the current economic downturn and preserving medium-term fiscal sustainability, Lipsky said in a statement."From this perspective, the authorities' intention to implement important structural reforms, including pension and tax reforms, by end-2009 is welcome," he said.The delay in approval of the second tranche had prompted Kiev to turn to Russia for aid.Prime Minister Yulia Tymoshenko recently asked Russia for a $5 billion loan, but little progress has been made in reaching an agreement.The IMF has estimated Ukraine's economy could contract by up to 8 percent this year, a markdown from the earlier 6-percent contraction forecast, because of the deteriorating global economy. The IMF expects inflation to hit 16.8 percent this year and slow to 10 percent next year.Ukraine's economic crisis is one of the worst in Europe. Industrial output slumped by 32 percent in January and February compared with a year ago, and output in the construction industry dropped by 57 percent during that period, according to the World Bank.