KIEV, Dec. 27 – Parliament on Friday approved Prime Minister Yulia Tymoshenko’s 2009 budget calling for a deficit at 3% of gross domestic product, jeopardizing a $16.4 billion loan from the International Monetary Fund.

The IMF, as well as President Viktor Yushchenko, urged the government to submit a deficit-free budget to overcome the financial crisis in 2009, but Tymoshenko had insisted that running the deficit would be the best response.

“The entire world is experiencing blows from the crisis,” Tymoshenko said at a government meeting on Saturday. “Now, we have a fundamental paper that gives hope for stability and growth of the real economy.”

Yushchenko, who must sign the budget to put it in effect, warned Tymoshenko last week that running a deficit would only worsen the crisis and may provide further downward pressure on the hryvnia, the local currency.

The hryvnia lost 43% of its value of the past three months, one of the worst such indicators in the world, underscoring the depth of crisis. Tymoshenko has been seeking to remove Volodymyr Stelmakh, the governor of the National Bank of Ukraine, for the bank’s failure to keep the hryvnia stable.

Ukraine must have the bvudget approved and signed before the end of the year as the country’s fiscal year coincides with the calendar year. The failure to approve the budget before December 31 would increase the risk that many social programs would not be financed in January 2009.

Yushchenko indicated on Friday that the budget does not provide a sufficient response to the crisis, but said he will probably sign it to avoid disruptions in social spending.

“Today, we have to take into account circumstances that are taking place,” Yushchenko said in an interview with Inter television Froday night. “The budget is approved, and I will sign it. This is needed for the paper to start to work.”

Tymoshenko said that signing of the budget would be a good news for domestic markets and foreign investors that seek to invest in Ukraine.

“This would be a signal of stability for the whole world,’ Tymoshenko said.

But the 2009 budget may trigger new talks with the IMF over its $16.4 billion emergency loan as original conditions had called for running a deficit-free budget in 2009.

Many lawmakers also said figures in the proposed budget were unrealistic: 0.4% growth against contraction forecasts of 5% by the economy ministry and 4% by the World Bank.

An aide to President Viktor Yushchenko, Oleksander Shlapak, said last week that new talks with the IMF would now be needed.

"I cannot say how they will end, but I think that the chances of winning them over are 50-50," Reuters reported citing Shlapak. (tl/ez)