Page last updated at 07:31 GMT, Thursday, 6 November 2008

IMF approves $16.4bn Ukraine loan

Man counts his cash in Ukraine
Ukraine's economic outlook has worsened

The International Monetary Fund (IMF) has approved a $16.4bn (10.3bn) loan to Ukraine to bolster its economy, shaken by global financial turmoil.

The financial body said it would make $4.5bn immediately available as part of the two-year package.

The plan includes "monetary and exchange rate policy shifts, banking recapitalisation and fiscal and incomes policy adjustments".

The IMF has agreed loans to several nations to restore their economies.

Hungary and Iceland have both reached agreement with the IMF over loan deals.

'Considerable stress'

The IMF has forecast that Ukraine will fall into recession next year, with its economic output shrinking by 3%.

"The Ukrainian economy, especially the banking system, is experiencing considerable stress," said IMF deputy managing director Murilo Portugal.

Falling prices for Ukraine's major export, steel, have led to a substantial deterioration in Ukraine's current account outlook
Murilo Portugal, IMF deputy managing director

He said said the government plan and the IMF loan aimed "to restore financial and macroeconomic stability by adopting a flexible exchange rate regime with targeted intervention".

The loan for Ukraine was finally approved after being agreed at the end of October.

Increasing access to credit and a property boom had led to rapid growth in Ukraine's capital Kiev, but investors have withdrawn funds following the recent financial turmoil and uncertainty.

Ukraine is also heavily reliant on commodities, but prices of these have fallen recently.

"Falling prices for Ukraine's major export, steel, have led to a substantial deterioration in Ukraine's current account outlook," said Mr Portugal.



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