KIEV, July 19 – The International Monetary Fund is “concerned” over Parliament’s recent initiative to hike social spending that may widen budget deficit and spur inflation, President Viktor Yushchenko’s office reported Friday.

IMF Managing Director Dominique Strauss-Kahn spoke with Yushchenko by phone earlier Friday as the IMF board of directors had been preparing to decide on a $3.3 billion Standby loan installment for Ukraine.

“The IMF managing director expressed special concerns over the initiatives that may reduce budget revenue or excessively hike spending that had been recently approved by Parliament,” the office reported. “In his opinion, this would lead to misbalance of state finances.”

Strauss-Kahn also rejected as “unacceptable” the government’s plans to tap monetary resources of the National Bank of Ukraine for helping the government to meet budget revenue targets.

“Mr. Strauss-Kahn underlined as unacceptable plans to finance budget deficit at the expense of direct emission or early transfer of [2009] revenue exceeding expenditures of the National Bank,” the office reported.

Prime Minister Yulia Tymoshenko has been pressing for the NBU to buy Treasury bills from the government helping to raise cash when other options of borrowing were limited.

An NBU official said recently the bank will stop buying T-bills amid concerns it had already printed too much money.

Strauss-Kahn will lead the IMF board of directors at a meeting within the next week or two to decide whether to approve disbursal of $3.3 billion installment to Ukraine.

An IMF team, led by Ceyla Pazarbasioglu, was in Ukraine earlier this month and had tentatively approved the installment, but the final decision will be passed by the board.

Yushchenko assured Strauss-Kahn that he will take action to prevent populist legislation from coming into affect, and said Ukraine will be able to implement reforms it had agreed to in the talks with IMF.

“The obtaining of the IMF installment will not help Ukraine overcome the crisis unless quick reforms are implemented,” the office reported citing Yushchenko. “That’s why [the president] will use his authority to make sure that required legislative changes are made.”

Strauss-Kahn spoke by phone with Yushchenko shortly after Parliament voted overwhelmingly to approve in the second reading a bill that greatly increases social spending.

The bill, which will have to debated in Parliament for at least another reading before, was originally initiated by the opposition Regions Party, but other groups, including one led by Prime Minister Yulia Tymoshenko, also backed it.

Analysts said political groups backed the bill seeking to benefit politically ahead of the next presidential election due on January 17, 2010. The president can veto the bill after it is passed in the final reading.

Viktor Yanukovych, the leader of the Regions Party and one of the leading presidential candidates, said that his party will press hard for the final approval of the bill.

Parliament is in a summer recess since Friday and is supposed to be back in session in early September. But Yanukovych said party lawmakers can swarm to Parliament “any time of day and night” to approve the bill in the final reading at a special emergency session that may be called before September 1.

“As soon as it’s ironed out, we are ready to swarm on Parliament any time of day and night, and to vote for it,” Yanukovych said in an interview with ICTV Sunday. “We have an opportunity to protect the people from the social crisis. This is our obligation before our voters.”

Ukraine received $7.3 billion from the IMF since November within the $16.4 billion two-year stand-by loan. (tl/ez)