Finance Minister D.C. Trip Aimed At IMF $

KIEV, Ukraine -- Finance Minister Yuriy Kolobov will travel to Washington later this month to try to get the International Monetary Fund to unfreeze its $15.5 billion standby loan program for Ukraine, Prime Minister Mykola Azarov said Tuesday.

Finance Minister Yuriy Kolobov.

Kolobov will meet Chris Jarvis, the recently appointed new IMF mission chief for Ukraine, to discuss further cooperation.

“I ordered the Finance Minister to go to Washington,” Azarov said in a statement.

The loan was frozen in early 2011 after the government had failed to increase by 50% natural gas prices for households and utility tariffs to balance the budget.

Ukraine may ask the IMF to resume the lending that would automatically go towards repaying its debts to the Washington-based lender, Azarov has suggested earlier this week.

Ukraine needs to repay $3.2 billion to the IMF by the end of the year, and has been struggling with raising enough funds from capital markets.

He also accused his predecessor, former Prime Minister Yulia Tymoshenko, for borrowing too much from the IMF in 2008, which forces the government to set aside major budget funds to pay the debts.

“In 2008, the government borrowed a huge sum, $11 billion. Where did this money go? What did they build with this money?” Azarov said.

“And now we are taking funds away from the economy and social sector to repay the debts.”

Ukraine will probably seek resumption of lending without raising the gas prices and tariffs after President Viktor Yanukovych had vehemently rejected the hike earlier this month.

“We have not agreed and will never agree to this,” Yanukovych has said.

Yanukovych has been refusing to hike the gas prices because the measure may deal a blow to his Regions Party at upcoming parliamentary elections in October, analysts said.

The Regions Party has been steadily losing public support over the past 12 months.

Without either resuming borrowing from the IMF or winning lower natural gas prices from Russia, the Ukrainian government is under serious pressure to meet its budget obligations.

Ukraine is to pay out 70-75 billion hryvnias ($8.6-$9.2 billion) in foreign debts in 2012, on par with debt payments in 2011, Yanukovych said.

Ukraine has been desperately trying to win resumption of the loan from the IMF earlier this year, but all attempts had ended in fiasco since the government had refused to hike gas prices.

Azarov changed his plans to travel to Zurich in January for a brief meeting with IMF Managing Director Christine Lagarde, but his talks had failed.

Days earlier a senior government team, led by then First Deputy Prime Minister Andriy Kliuyev, traveled to Washington, but had also failed to make progress in the talks.

Serhiy Tyhypko, deputy prime minister and a member of the team for the talks in Washington, said the gas price is the only problematic issue in relations with the IMF.

Jarvis, a former head of the IMF mission to Belarus, replaced Thanos Arvanitis as IMF mission chief for Ukraine, the IMF reported earlier this month.

An IMF team last visited Ukraine between October 25 and November 3, 2011.

Source: Ukrainian Journal