Ukraine leans on leading nations for loans to meet shortfall - FT

11:16, 09 February 2009
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Tymoshenko sent letters to the US, Russia, China, Japan and EU

Ukraine has appealed for emergency loans from the world`s richest countries to help support its economy, which has been battered by the global financial crisis, The Financial Times reported.

Yulia Tymoshenko, Ukraine`s premier, said her government had sent letters to the US, Russia, China, Japan and the European Union asking for loans to fill a shortfall in budget revenues for this year.

"We have already received a positive response from some countries, including Russia. Russia is ready to sign such loan agreements," Ms Tymoshenko said at the Munich Security Conference at the weekend. She did not clarify how much Kiev was seeking to borrow, but reports in Ukraine suggested Russia could lend $5bn (?3.9bn, £3.4bn).

Ms Tymoshenko said Ukraine was keen to harmonise relations with Moscow that soured after last month`s gas prices dispute. But she insisted Kiev would stick to a western integration agenda that included efforts to join both the European Union and Nato.

News that Ukraine was seeking such loans amid frozen credit markets comes days after an International Monetary Fund delegation warned of "serious problems" brewing in its economy. A fund delegation ended its one-week visit to Kiev last week but provided no clear signal on whether it would grant further disbursements from a $16.5bn standby facility agreed last year. Ukraine received a first tranche of $4.5bn last November. Future disbursements depend on the implementation of tough conditions and are needed to keep Kiev`s currency stable. The hryvnia lost nearly 40 per cent of its value last year.

The IMF`s concerns centre on Kiev`s 2009 budget, which has a 3 per cent deficit in spite of a fund stipulation it be deficit-free. It also seeks a freeze on social spending at a time when more than 1m out of a population of 46m have lost their jobs.

Ukraine`s gross domestic product is expected to contract by around 5 per cent this year. The country is also struggling to tame annual inflation of more than 20 per cent.

The Financial Times

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