IMF Says Loans in the Works To Assist Ukraine
Seeking to combat a spreading global financial crisis, the International Monetary Fund said Sunday it had reached a tentative agreement to provide Ukraine with $16.5 billion in loans and announced that emergency assistance for Hungary had cleared a key hurdle.
Managing director Dominique Strauss-Kahn stressed that the 185-nation lending agency would act with speed to provide support for countries whose economies are being battered by the crisis.
Strauss-Kahn said the loan for Ukraine was designed to bolster confidence. “The IMF is moving expeditiously to help Ukraine,” he said. “This program is focused on the essential upfront measures needed to maintain confidence and economic and financial stability.”
Strauss-Kahn separately announced the IMF staff had reached broad agreement with Hungarian authorities on a reform package that the country would implement as a condition for getting its own emergency loans from the IMF.
Strauss-Kahn said the IMF was ready to approve a “substantial financing package” for Hungary within days. He did not say how large the loan would be.
The announcements came two days after the IMF said it was supplying a $2 billion loan package to Iceland, the first Western nation to receive IMF assistance in more than three decades.
Strauss-Kahn said the Ukraine agreement would be sent to the IMF’s board for approval once the country’s legislature made changes to improve how its government handles bank failures.
Ukraine’s Finance Ministry and its central bank said the loan would help shore up the country’s flagging economic situation. A sharp decline in world prices for steel, Ukraine’s main export, and a steep drop in the value of its currency, the hryvna, have left analysts speculating that the country faces dire straits. The hryvna, which has lost more than 20 percent in the crisis, fell to its historic low Thursday, trading at 6.01 per $1.
The crisis comes on top of ongoing political turmoil, with the country’s leading politicians feuding ahead of new parliamentary elections set for December.
The IMF loan is expected to help stabilize the financial sector, but the deepening political crisis could threaten to block the deal. Allies of Prime Minister Yulia Tymoshenko broke parliament’s electronic voting system Friday as they protested President Viktor Yushchenko’s order to hold early elections.
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