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IMF team arrives in Kiev for loan talks
Journal Staff Report

KIEV, April 8 – An International Monetary Fund team arrived in Ukraine on Wednesday for talks over a $1.85 billion loan installment after receiving “strong assurances” from Ukrainian leaders that all anti-crisis bills will be soon approved.

The development represents a major concession from the IMF as Ukraine failed to approve the bills last week, and even Prime Minister Yulia Tymoshenko was not then sure the talks could resume.

Ceyla Pazarbasioglu, who leads the IMF team, said the decision to send the team to Ukraine was approved after receiving last week “strong assurances” from the Ukrainian leaders that the legislation will be approved.

Pazarbasioglu met Tymoshenko and Volodymyr Stelmakh, the governor of the National Bank of Ukraine, on the first day of talks that may last for about a week, according to the Ukrainian government.

Ukraine badly needs support from the IMF to avert default, including corporate defaults, on foreign debts this year and next as on-going economic crisis had greatly reduced inflow of hard currency to the country.

The IMF approved $16.4 billion two-year rescue package to Ukraine in November and released the first installment of $4.5 billion the same month, but the talks have stalled in January over the second installment worth $1.85 billion.

The Tymoshenko government refused to comply with the IMF demands of keeping budget deficit from widening, forcing the Washington-based lender to postpone the talks, putting great strain on the country.

Tymoshenko told Pazarbasioglu that Ukraine was interested in “finding the way out of this difficult situation and to continue the cooperation.” She said the government over the past several weeks approved measures that balance the budget.

Tymoshenko-led government coalition controls about 213 lawmakers in 450-seat Parliament, a minority, and relies on opposition groups to approve the legislation. This was the reason why Parliament had rejected three out of five anti-crisis bills on March 31, including the bill that is increasing revenue of the Pension Fund, the state-operated social security agency.

Meanwhile, the government has been making some progress in preventing acceleration of inflation and will most likely use this to showcase its efforts to fight the crisis, analysts said.

Ukraine’s consumer prices rose 1.4% on the month in March, compared with 1.5% in February and 2.5% in January, according to the State Statistics Committee. The prices rose 18.1% on the year compared with March 2008.

The released figures are good news for the government as the threat of accelerating inflation, coupled with steep economic contraction, has been cited by analysts as the biggest challenge for Ukraine during ongoing severe economic crisis.

Ukraine’s economy is estimated to contract about 20% on the year in the first quarter as falling external demand for steel, the country’s main exports, had forced steel companies to reduce output, analysts said. The government is expected to report the first-quarter GDP statistics later this month. (tl/ez)




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