KIEV, Feb. 27 – Ukraine’s debt default option is “not on the agenda” as the country will seek to win resumption of its $16.4 billion loan from the International Monetary Fund, President Viktor Yanukovych’s top economic aide said Saturday.

Iryna Akimova, the first deputy chief of staff at the Yanukovych office, responded to mounting concerns that Prime Minister Yulia Tymoshenko’s massive borrowing policy has been driving Ukraine towards default.

“Right now the problem of domestic and foreign debt default is not on the agenda although the three-fold increase of debt over the past year has shocked both economists and non-economists,” Akimova said in an interview with Inter television. “

Ukraine needs to pay an estimated $30 billion in sovereign and corporate foreign debts this year, while the country’s hard currency reserves were at about $25.3 billion as of January 31, according to the central bank.

Viktor Suslov, the chief of the State Commission on Financial Markets Regulation, recently said the country’s foreign exchange reserves were not enough to meet the debt payments.

Arseniy Yatseniuk, who Yanukovych is currently considering as possible next prime minister, has recently told lawmakers at a close meeting that the country may soon have to declare default.

The speculations of debt default are caused by massive borrowing policy over the past 12 months, Akimova said, adding this policy must be stopped to avert the worst-case scenario.

“If the pace of debt increase continues at the current rate, the country will be very close to default,” Akimova said adding that this option would “undermine trust of foreign investors for many years ahead.”

Ukraine will have to launch painful economic reforms to cut budget deficit, to improve the banking sector and to encourage foreign investments in the economy, and to do that Ukraine will have to resume cooperation with the IMF.

“I am deeply convinced that the cooperation is necessary,” Akimova said. “I am confident that the talks with IMF officials will be continued.”

The IMF suspended its $16.4 billion two-year stand-by loan program to Ukraine in November 2009 after the Tymoshenko government had failed to approve 2010 budget and narrow its budget deficit.

Ukraine received $10.6 billion in three installments from the IMF between November 2008 and November 2009. The IMF said it may resume lending after the presidential election.

The speculations over Ukraine’s ability to survive debts payments come as the country has suffered one of its worst economic contractions in 2009.

The country’s economy contacted by 15% on the year in 2009, led by shrinking steel exports, due to weakening demand overseas, the government reported. Ukraine’s banking sector was also badly affected by the crunch. (tl/ez)