IMF Lowers Loan Bar To Allow Ukraine To Pay For Gas

WASHINGTON, DC -- The International Monetary Fund said Wednesday it had eased loan criteria for Ukraine to allow the government to use international reserves to meet its debts, including gas payments.
Ukraine, which has been hammered by the global financial and economic crises, was granted its request for a modification of its $16.4-billion-dollar standby arrangement, the IMF said in a statement.The IMF said it had agreed to lower the end-December floor of Ukraine's net international reserves by approximately $2.0 billion dollars."This important step will enable the Ukrainian authorities to use existing resources to make external payments due -- including gas payments -- within the framework of Ukraine's program with the fund," the Washington-based institution said."It does not involve any new disbursement by the IMF," the fund noted.The head of Russian gas giant Gazprom said Friday that Ukraine had cut back on purchases of Russian gas since mid-December and appeared to be facing serious cash problems."Ukraine is experiencing serious problems with payment," Alexei Miller said on Russia's Vesti channel in comments carried by the Ria-Novosti news agency.Ukraine has until January 11 to pay for gas, according to Gazprom, which has cut off supplies to the country over unpaid bills repeatedly in the past.Ukraine has been seeking the next installment of $3.8 billion dollars from its IMF standby loan.So far the government has received a total of $10.6 billion dollars of the $16.4-billion-dollar credit extended in November 2008 to help Ukraine cope with the global economic crisis.Acting Finance Minister Igor Umansky a week ago was quoted by Interfax news agency as saying that the IMF had turned down the request for the new installment to be disbursed this year due to concerns over the intense campaigning for a presidential election on January 17.Umansky led a delegation to appeal for the release of at least half the new credit installment -- or about $2.0 billion dollars -- in talks at the IMF's Washington headquarters this month.He said negotiations with the fund would continue in January.Cash-strapped Kiev this month called its financial situation without the IMF loan money "extremely difficult."Ukraine has been hard hit by the economic crisis after the global slowdown triggered a massive slump in its export-dependent heavy industrial sector.The IMF loan -- by far Ukraine's biggest source of foreign income in 2009 -- is crucial to help the country overcome the crisis, but the IMF has been exasperated by political infighting and new laws on wages and pensions.