Government Vows To Stick To IMF Pledges

KIEV, Ukraine -- Ukraine vowed to stick to an agreement with the International Monetary Fund and to implement key reforms in order qualify for a $14.9 billion loan from the organization and improve its borrowing options.

Prime Minister Mykola Azarov

Prime Minister Mykola Azarov criticized the previous government of former Prime Minister Yulia Tymoshenko for promising and then failing to implement reforms.

"Unlike the previous government, we will carry out all points of the agreement with the IMF to the letter," Azarov said. "We must restore our credibility."

The comment comes a day after Tymoshenko suggested postponing indefinitely hiking natural gas prices for households, a key demand from the IMF.

Tymoshenko admitted on Wednesday that her government had been exploring the possibility of hiking the prices, but had eventually repeatedly decided against the unpopular step.

“When I was the prime minister, the IMF had also demanded hiking the prices.” Tymoshenko said. “I never met those demands, and received three installments.”

The IMF disbursed about $10.5 billion to Ukraine between November 2008 and September 2009 while Tymoshenko has refused to hike natural gas prices, leaving a huge gap in the budget.

The IMF refused to disburse the fourth tranche after Tymoshenko had repeatedly failed to implement the demand and other reforms.

The government decided earlier this week to hike gas prices for households by 50% starting August 1. Earlier this month, the governing coalition approved amendments to the 2010 budget reducing the budget deficit and slashing budget spending to meet IMF demands.

Ukraine has been seeking to get at least 10 billion hryvnias, or $1.25 billion, to bridge budget gas this year, according to a finance ministry official.

The IMF announced on July 4 that Ukraine may qualify for $14.9 billion 2.5-year loan later this month if the government implements key economic reforms, such as hiking domestic gas prices and reducing budget deficit.

Deputy Prime Minister Serhiy Tyhypko, who is in charge of talks with the IMF, said the IMF board will probably meet on July 28 to decide on the Ukraine loan.

The approval of the IMF loan will also unlock a number of other sources of financing, including from the European Union, from the World Bank and from the European Bank for Reconstruction and Development.

“If the cooperation with the IMF is resumed, Ukraine will be able to receive 600 million euros from the European Union,” Parliamentary Speaker Volodymyr Lytvyn said Thursday. “This money has been set aside, but we cannot get it – there is a clear condition: resuming cooperation with the IMF.”

“This concerns the cooperation with the World Bank, the European Bank [for Reconstruction and Development] and with other financial institutions in the world and in Europe,” Lytvyn said.

Source: Ukrainian Journal