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IMF: New loans to Ukraine still difficult despite reform attempts
Published in Saudi Press Agency on 14 - 04 - 2009

New loans to Ukraine's cash-strapped government
remain difficult to approve, despite recent attempts at market
reforms in country, a senior fund official said Tuesday, according to dpa.
"We are continuing our discussions...but at this point is is
premature to say, when it might be possible," said Ceyla
Pazarbasioglu, International Monetary Fund (IMF) mission head in
Ukraine.
Pazarbasioglu was in Kiev for the second day of talks with
Ukraine's leadership on the possible pay-out of loans desperately
needed by the former Soviet republic to cover widening budget
deficits and a wobbling banking sector.
The IMF in November handed Ukraine 4.5 billion dollars in an
initial tranche of a planned 16 billion dollar emergency loan to be
paid out over the next 12 months.
The Fund in March refused to turn over the second tranche of the
loan, 4 billion dollars, citing Kiev's failure to implement banking
and other market reforms as stipulated in the November loan
agreement.
Ukraine's Prime Minister Yulia Tymoshenko last week said she
"looked forward" to Pazarbasioglu's visit, and that she "was fully
confident" meetings between IMF and Ukrainian officials would re-open
the IMF credit line to Kiev.
Tymoshenko in Monday talks with the IMF asked the fund to advance
the delayed March tranche, and at the same time hand over the loan's
third tranche by agreement due to be transferred only in June.
Tymoshenko's cabinet less than two hours after Pazarbasioglu's
remarks announced it had instituted a packet of economic reform laws,
according to Tymoshenko effectively meeting all IMF stipulations.
"I am sure that this package of anti-crisis executive orders,
which have been implemented by the government, will make possible a
balancing of Ukraine's financial system...and without doubt, form the
basis of a favourable decision between Ukraine and the IMF,"
Tymoshenko said, according to a Channel 5 television report.
The instructions issued by Tymoshenko to the Ukrainian cabinet
called for among other reforms reduction of government expenditure,
hikes to legal maximum prices of energy, a single rate for pension
taxes levied on businesses, a balanced budget for the state-owned
national gas monopolist Naftohaz Ukrainy, and a recapitalization of
the country's banking sector.
The Ukrainian government, though short of income, will nonetheless
devote its own resources towards propping up the weakest banks,
Tymoshenko said, with some 5.7 billion dollars to be spent purchasing
controlling shares of the weakest ones.
IMF officials in talks with Kiev have said their greatest concern
is Ukraine's banking industry, as a few failures in Ukrainina loan
institutions could trigger a crash of banks across East Europe.
A key condition of the IMF money loaned to Ukraine thus far is
that it go towards preventing widespread failures of Ukrainian banks.
Prime Minister Tymoshenko's Tuesday declarations - clearly aimed
at Fund concerns - marked a retreat from earlier promises to voters
that her government would never support across-the-board hikes to
energy prices, or use government money to fund big business such as
banking at the expense of social services like health or subsidised
food prices.
Ukraine's parliament has been deadlocked for more than a year
between three political parties run respectively by Tymoshenko,
President Viktor Yushchenko, and former Prime Minister Viktor
Yanukovich.
The legislature since since November has rejected or refused to
consider practically all the reforms declared by Tymoshenko on
Tuesday to have been made law by her orders as Prime Minister.


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