Page last updated at 16:19 GMT, Friday, 17 April 2009 17:19 UK

IMF agrees new loan for Ukraine

Prime Minister of Ukraine Yulia Tymoshenko
Ukraine's government has agreed to limit its budget deficit in 2009

The International Monetary Fund (IMF) has reached an initial agreement with Ukraine on the second instalment of a multi-billion dollar loan package.

The IMF said its staff would recommend the release of $2.8bn (£1.9bn) in loans and the board would consider it by May.

The announcement comes after months of wrangling, with the IMF demanding Ukraine reduce its budget deficit.

In November, Ukraine received the first $4.5bn of a $16.4bn IMF loan to help weather the economic crisis.

'Encouraging signs'

If the board gives its approval, the money will be released, subject to Ukraine's progress on adopting an economic programme recommended by the IMF.

A further instalment of $2.8bn would be released later, after another review of Ukraine's economic progress.

The resumption of cooperation with the IMF is more important than the money
Olena Belan, analyst at Dragon Capital

There were a number of encouraging signs that Ukraine's economy had started to adjust to the global crisis, said Ceyla Pazarbasioglu, the IMF mission chief in Ukraine.

"The exchange rate has undergone sizeable adjustment, the current account deficit has narrowed significantly and inflation has fallen more than expected," she said.

"Against this backdrop and following extensive and constructive discussions with the authorities, we have reached understandings on outstanding policy issues, including the implementation of fiscal corrective measures and bank recapitalisation and strengthening."

The Ukrainian authorities had committed themselves to maintaining the budget deficit at 4% of GDP in 2009, she added.

The World Bank has predicted the Ukrainian economy would shrink by 9% in 2009.

'Good signal'

Ukraine's industrial production has been severely hit by the global crisis, after a plunge in the price of metals - the country's main exports.

Analysts welcomed the IMF's announcement.

"The resumption of co-operation with the IMF is more important than the money," said Olena Belan, analyst at Dragon Capital.

"It is a good signal for investors, showing that Ukraine is taking anti-crisis measures and the economic situation is under control."

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