KIEV, Oct. 16 – The International Monetary Fund on Thursday began talks with Ukraine over an up to $14 billion loan package to help the country cope with its mounting financial crisis, Prime Minister Yulia Tymoshenko said.

An IMF team arrived in Kiev at the invitation of the Finance Ministry, with pressure growing on Ukraine’s national currency and the banking system as the credit crunch spreads worldwide.

This is the first time an IMF team has arrived in Ukraine in more than five years, showing the degree of concern at the Finance Ministry over the magnitude of the crisis.

“Today we have information from the IMF about its readiness to review disbursement of between $3 billion and $14 billion to Ukraine for stabilization of the financial system,” Tymoshenko said at a press conference.

The cited figures underscore the scale of the problem and dash Tymoshenko’s earlier assurances that the world financial crisis would probably not affect Ukraine.

The developments come as President Viktor Yushchenko called a meeting of the National Security and Defense Council, the country’s top security body, on Friday to discuss on-going financial crisis.

At the meeting, Yushchenko is expected to unveil his economic rescue package that requires coordinated actions by the government and by the central bank.

The National Bank of Ukraine, which has been desperately trying to stabilize the financial system and the banking sector, is thought to have spent more than $1 billion to support the hryvnia in the first two weeks of October.

The NBU currently holds about $36.3 billion in foreign exchange reserves, and has earlier this month pledged its willingness to spend “billions of dollars” - if necessary - to support the hryvnia.

The hryvnia lost more value on Thursday, closing at 5.30 hryvnias to the dollar in trading between commercial banks, compared with 5.19 hryvnias/dollar the previous day. The NBU did not disclose whether it has been spending any hard cash to back the hryvnia on Thursday.

The hryvnia lost 9.2% against the dollar over the past three weeks, affected by widening foreign trade deficit as imports have been outpacing exports at high pace.

Ukraine reported $12.5 billion in deficit in foreign trade with goods and commodities in January through August, a sharp widening compared with $5.9 billion reported in the same period a year ago, the State Statistics Committee reported Thursday.

The figures show the deficit has widened by about $1.5 billion in August alone, suggesting it may widen further by at least $6 billion through the end of the year, according to the committee’s data.

The imports have been outpacing the exports for several years now, but the worsening financial crisis had reduced the amount of foreign investments in Ukraine, exposing the country to sharp current account deficit.

Finance Minister Viktor Pynzenyk met the IMF team on Thursday and the parties agreed to come up with recommendations over steps that Ukraine must take to minimize the impact of the crisis.

Meanwhile, the actual disbursal of the money by the IMF may be delayed due to ongoing political crisis in Ukraine with early parliamentary election scheduled on December 7.

The IMF, during its active lending to Ukraine in late 1990s, has been repeatedly postponing disbursements ahead of the election, citing political stability as one of the top concerns.

Tymoshenko, who has been desperately trying to stop the early election by fighting in courts Yushchenko’s decree dismissing Parliament, used the IMF’s apparent concerns over politics to put pressure on the president to reverse the decree.

“The IMF said it will be very difficult to hold the talks with Ukraine at the same time when proposals for the early election sound,” Tymoshenko said. (nr/ez)