IMF to Ukraine in `coming days,' representative says
As frozen global credit markets threaten to derail the nation`s banking industry
The International Monetary Fund is sending a delegation to Ukraine in ``the coming days`` as frozen global credit markets threaten to derail the nation`s banking industry and force the central bank to prop up the currency, Bloomberg reported.
Ukraine has injected 9.898 billion hryvnia ($1.9 billion) into the banking system this month, almost double what they lent in September, as Standard & Poor`s and Fitch Ratings downgraded the Ukrainian banks` outlook to ``negative.`` Natsionalnyi Bank Ukrainy has sold $1 billion of the former Soviet republic`s foreign currency reserves since Oct. 3, as the hryvnia slumped to a 14-year low against the dollar.
``There will be an IMF team in Kiev to discuss recent developments and help address the challenges, which are obvious,`` said Balazs Horvath, the IMF`s representative to Ukraine, in a phone interview from Budapest. ``They`re not in crisis at present but it`s very prudent to think through all the scenarios.``
The international body, which promotes monetary cooperation and exchange rate stability, is in demand around the world as government bailouts and rescue packages for lenders struggle to arrest a tumble in stocks and bond prices. Iceland, whose three largest banks collapsed, may seek IMF aid to attract loans from other countries, and the body offered help ``as needed`` to Hungary yesterday.
``This crisis is a big opportunity for the IMF to reassert itself on the global financial stage,`` Win Thin, a senior currency strategist in New York at Brown Brothers Harriman & Co. wrote in an e-mail to clients yesterday. ``Emerging market countries with large current-account deficits and/or large external debt loads are very vulnerable.``
The hryvnia slumped 6.3 percent this month and the cost of protection against a default on government bonds rose to a record as investors avoid countries having to fund high current-account deficits. Ukraine`s current-account gap, the broadest measure of trade in goods and services, was $7.7 billion in the first seven months of the year and will probably widen to $15 billion in 2008, central bank Governor Volodymyr Stelmakh said yesterday.
Ukraine wants ``systematic support`` from the IMF to help stabilize financial markets, First Deputy Prime Minister Oleksandr Turchynov said in Kiev today.
President Viktor Yushchenko called elections for Dec. 7 last week, the fourth in five years, after his party split with Prime Minister Yulia Timoshenko over how to best control the highest inflation rate in Europe and relations with neighboring Russia.
The current-account deficit and political situation are ``all factors`` that the IMF team will discuss with Ukrainian authorities, who have coordinated on the visit, Horvath said. The IMF is sending teams to a number of emerging-market countries in ``the coming weeks`` in the context of the global liquidity squeeze, he added.