KIEV, March 27 – A team of the International Monetary Fund arrived in Ukraine on Wednesday to check if the government has implemented reforms to qualify for a $15 billion stand-by loan amid a worsening economic environment.

The government needs either the IMF lending resumed or a deal signed with Russia this year to lower natural gas prices to prevent a looming debt crisis and an economic contraction.

“If Ukraine gets the stand-by loan, President Viktor Yanukovych will be able to postpone the issue of a gas pipeline joint venture with Russia,” Yuriy Korolchuk, the head of the Institute for Energy Studies, a Kiev-based think tank, said.

The talks on the gas pipeline joint venture are part of broader 3-year negotiations on lowering of Russian gas prices for Ukraine.

Ukraine overpays Russia about $6 billion in natural gas prices every year after signing a controversial 10-year natural gas agreement in January 2009, according to Prime Minister Mykola Azarov.

Ukraine also needs to repay this year $5.8 billion in earlier loans from the IMF, and the government hopes that the IMF can resume the lending at least to help with these payments.

“We are interested in refinancing of those credits that have been received earlier, for example, from the IMF,” Ihor Prasolov, the economy and foreign trade minister, said at a press conference. “We have all reasons to believe that this assistance will be provided to Ukraine.”

Ukraine’s economy was likely to contract in the first quarter after reporting a dismal 0.2% on-year expansion in 2012, analysts said. High debts and high gas prices are cited by the government as main issues hampering economic growth.

The IMF team will stay in Ukraine until April 10 holding talks with government officials and the National Bank of Ukraine before returning back to Washington.

First Deputy Prime Minister Serhiy Arbuzov, who has been pushing for the resumption of lending from the IMF and repeatedly traveled to Washington for talks, said earlier Ukraine hopes to get $15 billion stand-by loan.

The IMF suspended its $15.5 billion loan to Ukraine in early 2011 after the government had failed to hike by 30% natural gas prices for households. The IMF wants the gas prices to increase to stop losses faced by Naftogaz Ukrayiny, the national energy company.

Naftogaz imports expensive Russian gas and resells it at a major discount to the households, leaving a major gap in its finances.

Ukraine received $3.4 billion from the IMF in 2010 after the Washington-based lender had approved its original $15.5 billion loan. The loan expired in 2012, prompting the parties to start talks on the next stand-by loan. (tl/ez)