Ukraine Wants To Tap IMF $ To Pay Deficit

KIEV, Ukraine -- Ukraine is seeking permission from the International Monetary Fund to spend $5 billion, or most of the money it can borrow this year, to cover its budget deficit, Deputy Prime Minister Serhiy Tyhypko said.

Deputy Prime Minister Serhiy Tyhypko

Ukraine can get $5.8 billion from the IMF by November, when its $16.4 billion two-year Stand-by loan expires, after having received $10.6 billion between November 2008 and November 2009.

The IMF usually channels its funding to the central bank, not the government, but it diverted from this practice last year by allowing the government of Prime Minister Yulia Tymoshenko to spend the money on budget deficit.

Tymoshenko was criticized by the Regions Party, which now leads the government, for spending the loan on the budget deficit, not on development projects.

The IMF is expected to send its team to Ukraine on March 24 for a week-long mission to check whether the country qualifies for the resumption of the Stand-by loan.

The IMF has been demanding that the government must reduce budget to about 4% of the GDP in 2010, down from an estimated 12% in 2009.

However, the government may be unable to narrow the budget deficit so quickly, and will probably suggest cutting the deficit to between 6% and 7% of GDP, according to Iryna Akimova, the chief economic advisor to President Viktor Yanukovych.

“One issue that the IMF team will be interested in is what kind of budget we’ll have,” Tyhypko said in an interview with Inter television on Sunday. “They want to see a realistic budget.”

Andriy Kliuyev, the first deputy prime minister, said the government will probably submit the draft 2010 budget to Parliament in early April.

Tyhypko was cautious about Yanukovych’s original plans to boost social spending this year, and said efforts must be aimed at helping the economy grow after 15% contraction in 2009.

“The most important thing today is to protect the poor and to start the economy,” Tyhypko said.

Source: Ukrainian Journal