IMF urges strong crisis management in Ukraine

09:07, 13 February 2009
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Discussions continue between the IMF and authorities in Kyiv

Ukraine needs to exercise strong crisis management as it wrestles with a budget deficit, a spokesman for the International Monetary Fund said Thursday, according to AP.

David Hawley said discussions between the IMF and authorities in Kyiv were continuing "on the need to find agreement on how to contain the general government deficit in 2009."

Other topics under discussion, he said, include monetary policy and restructuring of the banking system "so that confidence in the banking and financial system can be restored."

He said he expected an IMF mission to return to Kyiv for more talks, but he did not give a date.

Last week, the IMF postponed the second $1.9 billion tranche of a $16.4 billion emergency loan after Ukraine fell behind on stabilization measures needed to receive the aid.

Ukraine is among the countries hardest hit by the global financial crisis. The economy is plunging into a deep recession, the national currency has lost 40 percent of its value since late 2008 and the state gas company is struggling to service multibillion-dollar debts for Russian gas imports.

A failure of the banking system could severely damage European banks that have major stakes in Ukrainian financial institutions.

Ukraine turned to Russia last week for a $5 billion loan and is seeking aid from the United States and other major industrialized nations.

"Strong commitment by the authorities to getting the country`s economy back on track on the path to sustained growth is the key to success in these economic programs," Hawley said, "so strong crisis management is essential."

He said obtaining financial help from other countries would temporarily alleviate financial difficulties.

"A high deficit could then be considered, which could help boost domestic demand and smooth the economic adjustment," Hawley said.

The Kyiv government`s 2009 budget is expected to show a deficit of 3 percent of gross domestic product.

AP via International Herald Tribune

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