Ukraine Lawmakers Approve 2010 Budget For IMF Loan

KIEV, Ukraine -- Ukraine’s parliament approved the 2010 state budget with a deficit of 5.3 percent of gross domestic product, opening the way for the next payment of the country’s International Monetary Fund loan.

Two hundred and forty-five deputies voted in favor of the budget, which the previous government failed to adopt last year, leading to a freezing of disbursements from the IMF credit. Lawmakers approved the bill in one vote instead of the customary three readings.

The IMF may send a mission to Ukraine in the first half of May, Deputy Prime Minister Serhiy Tigipko said according to the government Web site today.

“This budget will allow us to move forward, to step forward on our way to reforms,” Finance Minister Fedir Yaroshenko told a smoke-filled parliament after opposition and government members fought, hurled eggs at each other and lit tossed smoke bombs in the building over a law that ratified an agreement allowing Russia to keep its fleet in the port of Sevastopol until at least 2042.

Ukraine was forced to turn to the Washington-based lender for help in late 2008 after the global financial crisis pushed the economy into a recession and weakened its currency.

A failure by the government to cut spending before January presidential elections pushed the budget shortfall to 8.8 percent of GDP, beyond the 4 percent limit set out in the loan agreement. In November, the IMF froze access to the loan.

The former Soviet state is now seeking a $20 billion loan until 2012, Tigipko said on April 23. The IMF, which has yet to confirm the agreement, has said the budget gap must be no wider than 6 percent of GDP this year for the country’s loan program to continue.

The IMF managers show a “demanding” attitude towards Ukraine and approached “with understanding” an increase in social spending, Tigipko said, according to the statement.

The IMF money will be used to “implement reforms to boost the economy,” Tigipko said last month. Ukraine’s Output shrank 15.1 percent last year, the deepest decline since 1994, according to the state statistics office.

The government expects private investments will increase “significantly” once cooperation with IMF is restored, Tigipko said in the statement, adding that investment plummeted in 2009.

Source: Bloomberg