9 Sep 2009 14:32

Ukraine must act to reduce risks from budget deficit - IMF

WASHINGTON. Sept 9 (Interfax) - Ukraine must take further steps to minimize the risks stemming from the nation's rising borrowing requirement in order to continue receiving assistance from the International Monetary Fund (IMF), according to a report posted on the IMF's web site.

Ukraine has already received $10.5 billion from the IMF under the stand-by arrangement, which will fully cover the budget deficit. However, it also faces risks that the deficit will increase due to capital outflow and insufficient investment. The authorities in Ukraine must bend every effort to prevent the deficit from widening, utilizing reserves and additional regulatory measures as needed, the report says.

Ukraine requested a loan of $16.4 billion from the IMF in November 2008. It is due to receive almost $6 billion more under the resulting stand-by arrangement, including $3.8 billion this year, possibly in late October or early November.

The first deputy head of the presidential administration, Alexander Shlapak, said Ukraine might not receive the next tranche at all since the government is not meeting commitments and is not being truthful with the IMF.

In order to receive the next tranche, Ukraine must pass new laws on a number of issues, including strengthening the independence of the Central Bank, raising the price that households pay for gas, reviewing the tax and pension systems and avoiding increases in social spending. Ukraine has deferred a decision on raising the price of natural gas to October from September after the measure was blocked in the Verkhovna Rada, which called instead for increasing salaries and pensions.

The IMF also wants Ukraine to resolve the issue of two problem banks: Nadra and Ukrprombank.