WASHINGTON, Oct. 26 – The International Monetary Fund on Sunday announced the outline of a $16.5 billion loan agreement with Ukraine to help the country survive a major banking crisis and to support the faltering national currency, the hryvnia.

The loan, larger than the $13 billion package that had been originally planned, was negotiated over the past 10 days, underscoring the urgency of the matter.

"The IMF is moving expeditiously to help Ukraine, and this program is focused on the essential upfront measures needed to maintain confidence and economic and financial stability,” IMF Managing Director Dominique Strauss-Kahn said in a statement.

“The strength of the program justifies the high level of access, equivalent to 800 percent of Ukraine's quota in the Fund," Strauss-Kahn added.

The loan, which is yet to be approved by the IMF’s executive board, is aimed at stopping panic in Ukraine as people have withdrawn almost 20 billion hryvnias, or $4 billion, from banks over the past three weeks.

The run on deposits, coupled with widening trade deficit due to the collapse of steel prices, Ukraine’s main exports, put major downward pressure on the hryvnia, which has lost 23% against the U.S. dollar on the cash market since late September.

In trading between commercial banks, the hryvnia lost only 10% over the same period, mainly due to heavy interventions by the National Bank of Ukraine, which has already shelled out $2.8 billion to support the currency. The NBU’s forex reserves fell to below $34 billion, according to the bank.

The latest loan package with Ukraine is a two-year ‘standby arrangement,’ an IMF rescue package that is usually designed for countries that need hard currency quickly.

Strauss-Kahn said consideration of the package by the IMF board would only come after Ukraine’s Parliament approves an economic rescue package, a set of bills aimed at helping the country to overcome the crisis.

Parliament, however, on Friday failed to debate the packages due to internal infighting, suggesting the process may face some delays, analysts said.

Strauss-Kahn praised Ukraine’s "comprehensive policy package designed to help the country meet the balance of payments needs created by the collapse of steel prices, and the global financial turmoil and related difficulties in Ukraine's financial system."

The rapidly falling steel prices widened Ukraine’s foreign trade deficit to $12.5 billion in January through August, compared with $5.9 billion in the same period a year ago, according to the State Statistics Committee.

Strauss-Kahn said the authorities' program was intended to support Ukraine's return to economic and financial stability, by addressing financial sector liquidity and solvency problems, by smoothing the adjustment to large external shocks and by reducing inflation.

At the same time, it would guard against a deep output decline by insulating household and corporations to the extent possible, he said.

The deal with Ukraine comes days after the IMF has announced a $2.1 billion loan package to Iceland, the first western country to get the money from the fund over the past 30 years.

The IMF, which has announced its readiness to lend billions of dollars to support nations hit by fallout from the global financial turmoil, is holding talks with several countries about possible new lending programs, as well as advising governments how to react to the economic downturn.

The IMF has more than $200 billion of loanable funds and can draw on additional resources through two standing borrowing arrangements with groups of IMF member countries.

The IMF says the financial turmoil hitting advanced economies is starting to slow growth in many emerging markets. The world economy is entering a major downturn in the face of the most dangerous financial shock in mature financial markets since the 1930s, according to the IMF's World Economic Outlook. (tl/ez)