Page last updated at 15:05 GMT, Tuesday, 10 February 2009

IMF may 'deny' Ukraine loan

Man counts his cash in Ukraine
Ukraine is facing tough economic problems

The head of President Yushchenko's economic office has said Ukraine could miss out on the second part of an International Monetary Fund (IMF) loan.

Roman Zhukovsky said the IMF has demanded that Ukraine reduce its budget deficit to 1% of GDP in 2009, from the current forecast at 3%.

In November Ukraine received $4.5bn (3.04bn) of a $16.4bn IMFloan to help weather the economic crisis.

The second tranche - worth $1.9bn- is now due.

"As we are not going to honour the engagements set out in the memorandum, it will be very difficult to count on the second tranche of the loan," said Mr Zhukovsky.

The IMF will decide whether it will pay the second part of the loan on February 15.

Mr Zhukovsky denied suggestions that the Ukraine will be required to repay the first tranche it had missed its fiscal targets.

Rocky road

If Ukraine were to lose its IMF funding, it would only serve to compound the already deteriorating state of its economy.

Ukraine's currency has halved in value against the dollar during the past six months, and inflation is running at more than 22% per year.

Meanwhile government decisions are being delayed as President Viktor Yushchenko and Prime Minister Yulia Tymoshenko are at loggerheads.

Last week the country was host to an IMF mission who conceded that Ukraine still had "a few issues outstanding".

In an increasingly bizarre turn of events, on Monday the Russian finance ministry said it could lend Ukraine up to $5bn to help plug its budget deficit.

Until recently the two countries were locked in a dispute which saw Russia increase the heavily-discounted price at which Ukraine had been paying for gas and then cut off supplies over late payments.

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