KIEV, Nov. 10 – Ukraine received the first payment of $4.5 billion from the International Monetary Fund as part of its emergency loan to support the country’s banking system and currency, Finance Minister Viktor Pynzenyk said Monday.

The loan, worth $16.4 billion, was approved last week by the IMF’s executive board as Ukraine struggles to maintain its balance of payments, hurt by falling prices of steel, its main export commodity.

The disbursed payment allows the National Bank of Ukraine to continue making robust interventions to support the hryvnia, which has been facing downward pressure since early October.

“Today Ukraine received the instrument to control the situation,” Pynzenyk said at the government’s meeting. “We have the opportunity to manage exchange rate, we have the opportunity to provide for stable operation of the banking system.”

The hryvnia rose slightly against the U.S. dollar in trading between commercial banks on Monday, partly due to ongoing interventions from the NBU, dealers said.

The hryvbnia closed at 5.78 to the dollar on Monday, compared with 5.80/dollar on Friday, while the NBU has been making “unlimited” interventions, according to the dealers.

The hrynia lost 25% of its value over the past 1.5 months after Ukraine had experienced a major slowdown in exports, but the local currency had recovered over the past week.

The hryvnia recovered after the NBU, jointly with the biggest commercial banks, among a number of measures had stepped up efforts to support the value of the hryvnia.

The NBU’s forex reserves fell to less than $32 billion as of the end of last week, down from $38 billion in early October, underscoring the bank’s efforts to support the hryvnia.

Ukraine qualified for the $16.4 billion loan after approving emergency legislation that calls for reforms and tightening of budget spending.

The loan calls for disbursing $4.5 billion payments every quarter within the next two years, provided that Ukraine adheres to program of economic actions that are incorporated in the emergency legislation. Ukraine will start repaying the loan four years from now.

Ukraine’s economy has been seen as vulnerable for some time, due to high inflation, low foreign exchange reserves relative to short term foreign debt, heavy reliance by its banks on foreign funding, balance sheet currency mismatches and a fragile fiscal position.

The collapse in the price of steel has led to a sharp deterioration in its terms of trade and its current account position, highlighting the external vulnerabilities. The spread of the global financial crisis has led to a sudden drying up of dollar and euro liquidity, along with a sharp decline in capital inflows.

The failure of Prominvest Bank, the nation’s sixth largest, prompted a run on bank deposits in October. The Ukrainian authorities were also forced to impose some exchange controls, which the IMF said Ukraine would lift as soon as confidence returned.

The US and other western nations are keen to stabilize Ukraine for geopolitical as well as economic purposes, given its important position in Eastern Europe as a neighbor of Russia. (nr/ez)