KIEV, Dec. 13 – Prime Minister Yulia Tymoshenko on Sunday disputed a Friday story in the New York Times suggesting the International Monetary Fund has decided to postpone a $3.5 billion loan installment to Ukraine.

The story, citing an unnamed official at the IMF, suggested the Washington-based lender would not resume cooperation with Ukraine until after the presidential election due in January 2010.

“It doesn’t correspond to reality that somebody has decided to postpone the cooperation until after the election,” Tymoshenko said in comments released by her press service. “It absolutely doesn’t correspond to reality.”

The comment comes as the government has been desperately trying to arrange any external financing in an attempt to bridge a huge budget deficit looming in December.

The government needs to raise about 60 billion hryvnias in December - four times of what it has been raising on average monthly this year - to be able to sustain budget spending in line with original forecast.

The government managed to maintain robust spending so far this year due to heavy financial support from the IMF, which had disbursed a total of $10.6 billion, or about 88 billion hryvnias, over the past 12 months.

But the lender decided to postpone the lending in November after evidence had indicated the government had failed to implement five out of six major reforms it had promised.

The opposition Regions Party earlier this year accused the IMF of giving out the money – with disregard to reforms - for political reasons merely to help Tymoshenko win the next presidential election.

Meanwhile, the talks between Tymoshenko government and the IMF suddenly resumed earlier in December as the government had apparently requested an “emergency lending” worth $2 billion, people familiar with the situation said.

“We continue the cooperation and hope that we can get the fourth installment before the end of the year,” Tymoshenko said. “The talks are underway.”

Meanwhile, any decision by the IMF to extend the funding to Ukraine before the election would be considered by many in the country as controversial and highly political.

The Regions Party has earlier this year already accused the IMF of “political” lending in support of Tymoshenko, a charge that the Tymoshenko government has denied.

Tymoshenko leads a minority government and has so far failed to approve the 2010 draft budget, while the deadline had been looming at the end of December.

It was so far the IMF’s policy not to extend lending to a country that fails to approve the budget, analysts said.

Another potential problem is that the government hasn’t had a legitimate finance minister since February when Viktor Pynzenyk had resigned citing a clash with Tymoshenko over widening budget deficit this year.

Tymoshenko was not able to appoint the new finance minister because she does not have political support in Parliament. (tl/ez)