KIEV, Dec. 12 – Ukraine is on the right track in implementing policies it had committed to when accepting an emergency loan to survive its worst economic crisis in a decade, an official from the International Monetary Fund said in an interview published Friday.

Ukraine has so far received more than a quarter of a $16.4 billion IMF rescue loan to help it cope with an economic crisis brought on by a drastic fall in its exports of its main commodity, steel, and in its national currency, the hryvnia.

Ceyla Pazarbasioglu, the head of the IMF mission to Ukraine, was quoted by the daily Kommersant Ukraine as backing the central bank's policies to let the market determine exchange rates and to recapitalize major banks, The Associated Press reported.

Pazarbasioglu also countered speculation that financial regulators were misusing the IMF funds.

"So far we have no comments or remarks and we have not felt in any way that the IMF funds are being used inappropriately," she was quoted as saying.

Meanwhile, the depth of the economic slump was illustrated by data from the State Statistics Committee, which late Thursday said industrial output fell 29 percent in November from a year earlier, the biggest decrease in a decade.

Parliament on Friday passed more legislation to soften the effects of the crisis. Lawmakers backed increasing funding for pensions, deposit insurance and prohibiting banks from unilaterally reconsidering the conditions of loans.

Viktor Yanukovych, the leader of the opposition Regions Party, recently gave Tymoshenko 100 days to either pull the economy out of the crisis or to face massive street protests.

Ukraine’s economy has been slowing pace of economic growth dramatically over the past two months due to a slowdown in demand for steel the country’s main export commodity.

The development already led to the hryvnia, the local currency, losing 35% of its value against the U.S. dollar over the past two months, while demand for the hard currency had been strong.

Bohdan Danylyshyn, the economy minister, predicted that Ukraine’s economy may shrink by 5% in 2009, the first annual contraction recorded over the past nine years.

The new forecast replaces a previous one that had predicted the economy expanding 6% on the year in 2009.

Lawmakers on Friday also approved a transfer of 3.2 billion hryvnia ($415 million) to the state oil and gas company Naftogaz, crippled by a $2.4 billion debt to Russia's natural gas giant Gazprom for imports.

Naftogaz officials traveled to Moscow Friday to continue talks on settling the debt and agreeing for next year's imports.

Russia is threatening to more than double the price for Ukraine's imports to over $400 per 1,000 cubic meters if Kiev fails to pay off the entire debt. (ap/ez)