KIEV, April 16 – President Viktor Yanukovych on Monday signed into law amendments to the 2012 budget that dramatically increase social spending ahead of the October parliamentary elections.

The amendments, which were approved by Parliament on Thursday and incorporate Yanukovych’s recent spending initiatives, may pose a new problem in Ukraine’s relations with the International Monetary Fund, which last year suspended its $15.5 billion Standby lending program for the country.

“The law calls for additional spending for the realization of the social initiatives that will enable measures to overcome poverty and to solve other acute problems,” Yanukovych’s press service said.

The law calls for increasing spending by 33.35 billion hryvnias to 391.36 billion hryvnias in 2012, according to the government.

The budget revenue target was also increased by 33.35 billion hryvnias to 366.17 billion hryvnias, the government said.

Most of the new spending – 18.2 billion hryvnias - will come to pay for Yanukovych’s social initiatives that anticipate payouts to poor people, lawmakers said.

Another 6.15 billion hryvnias will pay for Yanukovych’s plan to pay out some of deposits frozen since the collapse of the Soviet Union after state banks had defaulted on payments.

The overall deposits are estimated at more than 100 billion hryvnias, and in 2009 then Prime Minister Yulia Tymoshenko had repeatedly promised to pay them off within years, triggering a spike in consumer inflation.

Arseniy Yatseniuk, the leader of the opposition Front of Changes party, accused the government for approving spending increases designed to help the Regions Party to win elections in October.

“This is an election campaign paper for the Regions Party,” Yatseniuk said.

The IMF suspended its $15.5 billion Stand-by loan, citing the government’s refusal to hike by 50% domestic prices of natural gas.

The gas price hike would steeply increase spending at Ukrainian households, and may further undermine Yanukovych’s Regions Party at the October elections, analysts said.

The government hired a Washington-based lobbyist firm earlier this year to help it persuade the IMF to resume the lending, a sign that government has desperately tried to obtain the loan.

The IMF has never approved the latest spending increases in the election year, while analysts said the move may further undermine the government’s position in the talks, making unlikely the release of the money this year. (tl/ez)