IMF Mission Agrees New Loan For Ukraine

KIEV, Ukraine -- The IMF has reached an initial agreement with Ukraine on a multi-billion dollar loan, breaking months of deadlock on a crucial lifeline for the country's battered economy, officials said on Friday.
The International Monetary Fund's mission to Ukraine said it would recommend the fund's board to release a second instalment of loans worth 2.8 billion dollars (2.1 billion euros) from a 16.4-billion-dollar package agreed in November."We have agreed with the authorities that we would propose to the IMF management that the next disbursement would be of 2.8 billion US dollars," Ceyla Pazarbasioglu, IMF mission chief to Ukraine, told reporters after talks in Kiev."We hope by mid-May that the (IMF) board of directors considers it appropriate," she said at a news conference with Ukrainian Prime Minister Yulia Tymoshenko.The release of the credit -- the second tranche of the 16.4-billion-dollar loan package to help Ukraine deal with the economic crisis -- had been held up by IMF worries about the country's budget deficit and unstable politics."The resumption of cooperation with the IMF is more important than the money," said Olena Belan, analyst at Dragon Capital."It is a good signal for the investors, showing that Ukraine is taking anti-crisis measures and the economic situation is under control," she added.According to Belan, there was an 80-90 percent chance the IMF's board would approve the disbursement.The loan, Ukraine's biggest source of foreign income this year, is seen as essential for state finances as the economy battles a massive slump in industrial production.The World Bank predicted the Ukrainian economy would shrink by nine percent in 2009 to make it one of the worst performing economies in the world.The global crisis triggered a slide in the value of Ukraine's currency and caused a plunge in prices for metals, the country's main export, leading to thousands of layoffs in its industrial east.But Pazarbasioglu said in a statement released later that while the economy was still badly affected by the crisis, the exchange rate had stabilised, the current account deficit had narrowed and inflation was falling.The authorities had committed to maintaining a budget deficit of 4.0 percent of GDP in 2009, she added.The loan programme would pave the way for a return to economic growth so long as the authorities showed "strong political commitment to decisive implementation of these policies."The sum of 2.8 billion dollars in the staff-level agreement is bigger than initially planned -- the second instalment of the loan was initially only believed to be worth 1.9 billion dollars.Payment of a third tranche, also of 2.8 billion dollars, would be dependent on a new review of the authorities' economic policies, the IMF said.If the IMF board of directors takes its decision by mid-May, the money will be disbursed "in a few days," Pazarbasioglu said.Ukraine received the first tranche of the credit -- worth 4.5 billion dollars -- in November.Ukraine's ability to deal with the crisis had been severely hampered by a scorching and sometimes farcical row between Tymoshenko and her one-time ally, pro-Western President Viktor Yushchenko.However the pair earlier this year agreed to act in harmony to fight the economic crisis, a condition set by the IMF for releasing the credit.The government had first warned in February that it risked losing out on the loan and Standard and Poor's subsequently slashed its ratings on Ukrainian debt to reflect a vulnerability to default.Analysts have said Ukraine is paying the price for failing to diversify its economy after the collapse of the Soviet Union and remains dependent on heavy industry, which is vulnerable to declines in export markets.

IMF Eases Ukraine Loan Conditions

KIEV, Ukraine -- The International Monetary Fund signaled Friday that Ukraine was making progress toward receiving a second crucial installment of a $16.4 billion emergency loan after the aid program was frozen earlier this month.
The IMF said it was ready to reconsider its loan requirements and allow Ukraine to run a bigger budget deficit after the financial crisis grew worse.The IMF had previously insisted that Ukraine trim the 2009 deficit from 3 percent to 1 percent of the GDP. But Ceyla Pazarbasioglu, the head of the IMF mission to Ukraine, said Friday that a balanced budget was impossible given the economy would contract by 6 percent or more this year and said the country could run a deficit as long it secures external funding."A balanced budget given a sharp decline in revenues does not seem feasible at this point in time," Pazarbasioglu told reporters in a conference call. "We are fully supportive of the authorities' efforts to raise additional funding from multilateral and bilateral creditors."Prime Minister Yulia Tymoshenko, who is reluctant to cut social spending and upset voters ahead of elections this year, has turned to G-7 countries and Russia to help close the budget gap.The IMF aid is critical to Ukraine, exposed as one of the most vulnerable to the global financial crisis.Industrial output has slumped by over one-third and Ukraine's currency has lost nearly half of its value against the dollar. The hryvna continued falling Friday, closing at 8.7 to the dollar Friday, down 46 percent from 4.9 in September.The crisis has been exacerbated by constant feuds among Ukraine's political leaders.On Friday, however, Tymoshenko, President Viktor Yushchenko, and parliament speaker Volodymyr Lytvyn pledged they would work together to come up with anti-crisis measures and policy changes in the coming days and present them to the IMF.Pazarbasioglu praised the effort. "The authorities are putting together their own anti-crisis package and measures and that is very encouraging," she told reporters.

IMF Warns Ukraine On Possible Credit Halt If Loan Terms Not Obeyed

KIEV, Ukraine -- The International Monetary Fund (IMF) warned Ukraine to keep to previously-agreed loan terms or risk a loss of badly-needed credits, a senior government spokesman said Monday. "The fund is insisting all the money loaned us go to our banking system," said Oleskander Shapak, a top economic advisor for President Viktor Yushchenko
"They have told us there can be no (Ukrainian domestic) political games with the loan terms," Shapak said, citing a formal message sent from IMF Ukraine mission head Ceyla Pazarbasioglu to Yushchenko over the weekend.An IMF team, after a visit to Ukraine earlier this month, failed to approve the issuance of the second tranche of a $16.5 billion dollar loan to the former republic, which had been scheduled for February 15.Ukraine's parliament had recently refused to pass a balanced budget, and money from the initial $4.5 billion dollar tranche sent Ukraine in November was not being focused on the former Soviet republic's banking sector, IMF officials charged at the time.The IMF warning sent to Kiev by Pazarbasioglu criticised line items in Ukraine's national budget bill for not specifying IMF loan money be used only to support Ukraine's banking sector, a violation of IMF loan terms agreed to by Kiev, Shapak said.A long-running feud between President Yushchenko and Prime Minister Yulia Tymoshenko has stymied most Ukrainian efforts to respond to a dramatic economic slowdown, with Yushchenko supporting hands-off monetary policy and reductions in state spending; and Tymoshenko calling for massive government intervention in industry, and state support to the national currency the hryvna.The pair are deeply divided on Kiev's relations with the IMF, with Yushchenko calling for close Ukrainian adherence to IMF loan conditions; and Tymoshenko supporting redirection of already-received IMF money to social service programmes, and flirting with Russia as a possible creditor in case of an IMF loan halt.Ukraine has been heavily hit by the world financial crisis, with GDP expected to contract in 2009, along with spikes to inflation and unemployment. Anti-government demonstrations have accelerated as the country's economy has worsened, with 2,000 Communists gathering in the capital Kiev on Monday to demand Yushchenko quit office immediately.Independent analysts in Ukraine generally agree the government is close to default - a situation that might well go critical were the IMF to refuse further cash infusions.Ukraine's current account budget deficit is some $5.5 billion dollars. High fuel prices and delayed foreign debt now coming due is likely to worsen the situation, observers said.Ukraine Finance Minister Viktor Pinzenyk handed in his portfolio on February 12 over the government's programme to control the ballooning budget deficit, saying he "could not continue while abandoning principles of a balanced budget, deficit control, and avoiding living on credit."

IMF Satisfied With Ukraine Loan Plan Amid Crisis

KIEV, Ukraine -- Ukraine is on the right track in implementing policies it had committed to when accepting an emergency loan to survive its worst economic crisis in a decade, an official from the International Monetary FunUkraine has so far received more than a quarter of a $16.4 billion IMF rescue loan to help it cope with an economic crisis brought on by a drastic fall in its exports of its main commodity, steel, and in its national currency, the hryvna.Ceyla Pazarbasioglu, the head of the IMF mission to Ukraine, was quoted by the daily Kommersant Ukraine as backing the central bank's policies to let the market determine exchange rates and to recapitalize major banks.Pazarbasioglu also countered speculation that financial regulators were misusing the IMF funds."So far we have no comments or remarks and we have not felt in any way that the IMF funds are being used inappropriately," she was quoted as saying.Meanwhile, the depth of the economic slump was illustrated by data from the State Statistics Bureau, which late Thursday said industrial output fell 29 percent in November from a year earlier, the biggest decrease in a decade.Parliament on Friday passed more legislation to soften the effects of the crisis. Lawmakers backed increasing funding for pensions, deposit insurance and prohibiting banks from unilaterally reconsidering the conditions of loans.Lawmakers approved a transfer of 3.2 billion hryvna ($415 million) to the state oil and gas company Naftogaz, crippled by a $2.4 billion debt to Russia's natural gas giant Gazprom for imports.Naftogaz officials traveled to Moscow Friday to continue talks on settling the debt and agreeing for next year's imports.Russia is threatening to more than double the price for Ukraine's imports to over $400 per 1,000 cubic meters if Kiev fails to pay off the entire debt.d said in an interview published Friday