Uncertainty on IMF loan sends Ukraine to Moscow

10:15, 10 February 2009
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Ukraine is failing to meet terms of its loan deal with IMF?

The International Monetary Fund is likely to suspend loan payments to Ukraine, a move that would further push the government toward Moscow for aid and exacerbate a feud between top leaders in Kyiv, according to The Wall Street Journal.

Ukraine is failing to meet the terms of its loan deal with the IMF, and likely won`t get the next installment this month, according to a person close to talks between the fund and the government in Kyiv.

Faced with a cash shortage, Kyiv is passing the hat around to global powers. Talks were held in Moscow last week over a $5 billion loan to help plug Ukraine`s budget deficit.

Ukraine Prime Minister Yulia Tymoshenko said her government also sent letters to the U.S., European Union, China and Japan, and that "Russia is ready to help with the credit agreement`s signing."

President Viktor Yushchenko criticized the talks with Moscow. "It`s a dangerous policy and poses a threat to Ukraine`s national interests," he said.

The U.S. State Department said it was looking into reports of Ukraine`s request for aid.

Ukraine has been hit by falling prices of metals and fertilizers, its main exports. Infighting between Mr. Yushchenko and Ms. Tymoshenko has led to a policy deadlock.

The deficit has been a sticking point in talks with the IMF on the release of the second installment of a $16.4 billion loan that it agreed to extend to Ukraine last year. The IMF released the first $4.5 billion tranche in November and had made further disbursements contingent on Ukraine reducing the budget shortfall and making progress on bank restructuring.

Ms. Tymoshenko`s government`s 2009 budget is forecast to show a deficit of 3% of gross domestic product.

Last week, an IMF mission monitoring Kyiv`s progress left without an agreement with the government that would have paved the way for disbursing the next loan tranche. Ceyla Pazarbasioglu, assistant director of the European Department of the IMF, said "further actions, including structural fiscal measures, are needed for us to recommend completion of the review."

The Wall Street Journal

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