IMF's Ukraine Mission Recommends Paying Next $1.6 Billion Loan Installment

KIEV, Ukraine -- The International Monetary Fund mission to Ukraine endorsed the government’s progress on its economic program, clearing the way for the IMF to release the second installment of the country’s $15.2 billion bailout.

IMF mission chief for Ukraine, Thanos Arvanitis.

The IMF board will make a final decision on the $1.6 billion tranche before the end of the year, the Washington-based lender said today in an e-mailed statement.

While Ukraine’s government has pledged to cut the budget deficit to 3.5 percent of gross domestic product in 2011 from 5.5 percent this year, it hasn’t yet submitted a draft to parliament.

“The IMF mission has reached staff-level agreement with the Ukrainian authorities,” Thanos Arvanitis, mission chief for Ukraine, said in the statement. “The government remains committed to fiscal consolidation aiming to bring public debt down over the medium term.”

Ukraine secured a 2 ½-year loan from the IMF on July 28 to cover its budget deficit, increase gold and foreign currency reserves and strengthen the economy, which shrank 15.1 percent last year.

It is the second loan Ukraine has received since 2008, when the IMF provided aid to strengthen the financial system and pay for Russian natural gas deliveries.

The country received $10.6 billion through November 2009, when payments were frozen as the previous government failed to cut spending before January presidential elections.

The government will be able to use $1 billion of the next installment to finance this year’s deficit, Arvanitis said.

Source: Bloomberg