KIEV, Dec. 22 – Ukraine’s cash-strapped government appears to have looted some 6.2 billion hryvnias ($780 million) out of state-controlled accounts in its scramble to stay financially afloat, President Viktor Yushchenko said in a filing asking prosecutors to investigate the case.

The figure surfaced after the State Treasury released data showing that the Treasury’s account was holding 1.8 billion hryvnias, while it should have kept 8 billion hryvnias.

The most of the cash supposed to be sitting in the account was owned by local governments throughout Ukraine and state-owned business entities, with a number of them recently reporting failed transactions when they have tried to pay for services.

“What did the government do to this money? It has eaten the money up,” Viktor Pynzenyk, a former finance minister, said Tuesday. “The money is not there.”

The development underscores the depth of the government’s financial crunch in December, while Prime Minister Yulia Tymoshenko has been desperately seeking to borrow at least $2 billion from the International Monetary Fund.

The government needs to raise at least 60 billion hryvnias in revenue in December alone - almost four times it has been raising monthly so far this year - in order to meet original 2009 budget revenue forecast, analysts said.

The government has been facing similar financial problems throughout the past 12 months, but it had managed to cover the crunch due to massive lending from the IMF.

The IMF disbursed $10.6 billion, or almost 84 billion hryvnias, to Ukraine over the past 12 months, before suspending the disbursements in November after the government had failed to implement promised reforms.

Now the government has been desperately holding the talks with the IMF seeking to borrow again to prevent a major budget failure, analysts said.

But Pynzenyk, who quit the government in February following a clash with Tymoshenko over the size of budget deficit, said further borrowing without implementing reforms would be a mistake.

“Is that normal that the country cannot live without injections?” Pynzenyk said. “The loan can help bridge budget gap, let’s say we can cover November. But what’s next?”

Pynzenyk estimated that Ukraine’s budget deficit will widen by 15 billion hryvnias in December to 103 billion hryvnias for the entire year of 2009.

The government has officially forecast its 2009 budget deficit at 31.5 billion hryvnias.

The rampant borrowing and the depreciation of the hryvnia over the past 12 months has been increasing Ukraine’s state debts to levels that can become unsustainable, Pynzenyk warned.

Ukraine’s state debt rose to 280 billion hryvnias as of the end of September, up from 189 billion hryvnias as of the end of December 2008, increasing financial burden.

“The spending on interest is growing. It has doubled only in the course of this year,” Pynzenyk said, adding the government plans to spend 22 billion hryvnias on interest payments in 2010. (tl/ez)