Ukraine and IMF talk conditions for loan

KIEV - The International Monetary Fund and Ukraine discussed on Monday the conditions Kiev needed to meet to secure a loan officials say may amount to up to $14 billion, the offices of the country's top leaders said.

By (Reuters)

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Published: Mon 20 Oct 2008, 6:04 PM

Last updated: Sun 5 Apr 2015, 2:23 PM

The IMF delegation, in Kiev since last week, met President Viktor Yushchenko and Prime Minister Yulia Tymoshenko for the second time. The premier said she was sure the talks would enable Kiev to secure ‘substantial’ financial assistance.

‘A package of measures was discussed which, if fulfilled, would enable Ukraine to receive financial and stabilisation support,’ a statement on the government Web site said.

‘Prime Minister Yulia Tymoshenko stressed that the talks would come to a successful conclusion and that it was very likely Ukraine would receive substantial financial assistance.’

The presidential Web site quoted the head of the delegation, Ceyla Pazarbasioglu, as saying that the Fund had already ‘formulated a range of measures that are required’.

Neither office described what conditions would be imposed for the loan. The IMF has made no comment on its visit.

Analysts have said the Fund is likely to require greater currency flexibility, higher interest rates and more reforms to the banking sector, though demands were expected to be less stringent than during the 1997 Asian crisis.


Hungary, Iceland and Serbia are also seeking help from the IMF to cushion them from the impact of the global crisis.

The chief concern for Ukraine is the ability of the government, banks and firms to refinance their debt with global lending grinding to a halt. Ukraine has been unable to issue a Eurobond this year, vital to cover any budget deficit.

Tymoshenko later told a news conference that this year's budget would be amended to cut spending. The current budget sees a deficit of $3.9 billion, or 2 percent of GDP.

Another worry is the hryvnia currency, depressed by a gaping current account deficit. With European and the US economies slowing down, foreign direct investment may no longer provide support for the hryvnia, which hit an all time low on Oct 8.

The IMF expects Ukraine's economy to slow dramatically next year to 2.5 percent from 6.4 percent this year as prices fall for steel -- a key export.

Financial woes are compounded by constant political turmoil in the ex-Soviet state, now facing its third parliamentary election since the 2004 ‘Orange Revolution’ which swept Yushchenko to power.

Rows between Yushchenko and Tymoshenko -- allies in the Revolution -- have stalled reforms in the past year since she became prime minister for the second time.

Ratings agency Moody's cut its outlook for Ukraine to 'stable' from 'positive'. This follows a downgrade from Fitch on Friday to B+ from BB-. Standard & Poor's put its B+ rating on review for possible downgrade last week.

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