IMF Mission Arrives In Ukraine To Resume Loan Talks

KIEV, Ukraine -- The International Monetary Fund said it hopes to reach a quick agreement with Ukraine after resuming talks on disbursing the second tranche of the former Soviet state’s $16.4 billion loan.

Ceyla Pazarbasioglu, IMF mission head in Ukraine.

The Washington-based lender came to Kiev after receiving “strong assurances” from Ukraine’s leaders last week that laws needed for resuming the loan program will be passed by lawmakers next week, said Ceyla Pazarbasioglu, the IMF mission head in Ukraine.

“Much was achieved in the past and we look forward to further discussion,” Pazarbasioglu said after meeting with Prime Minister Yulia Timoshenko and central bank Governor Volodymyr Stelmakh in Kiev. “We hope we will reach an agreement as soon as possible.”

Ukraine, like other countries in the region, including Hungary, Romania and Latvia, was forced to seek support from the IMF to avert a default and stabilize its banking system because of the global financial crisis. The IMF approved the two-year loan in November and $4.5 billion was disbursed that month.

Ukraine’s proposal to run a budget deficit of 5 percent of gross domestic product forced a delay in the second installment, originally scheduled for mid-February.

Budget Financing

The eastern European country has since assured the IMF it will find “non-inflationary” ways of financing the budget gap and approved laws to raise tobacco, alcohol and diesel taxes last week. Ukraine needs to pass several more laws, including one on bank restructuring, the IMF has said.

“We hope important measures will be taken next week that will help Ukraine out of the crisis,” said Pazarbasioglu. “It is very important to restore confidence and financial stability in Ukraine.”

The IMF mission will finish its work in one week, Ukraine’s Deputy Finance Minister Andriy Kravets told reporters. “We’re counting on positive results,” he said, adding the mission has shown “support for the government’s work.”

“Financing will resume when we reach certain state budget deficit indicators,” Kravets said. “There are no unresolved issues on financing the 2009 state budget deficit.”

Ukraine is in “quite successful” talks with the World Bank on how to fund the budget deficit, Kravets said, adding the issue will be solved “in the coming months.”

The World Bank and the government are also deciding on a loan for recapitalizing banks, Kravets said, without providing details.

Source: Bloomberg