Ukraine Gets $2B IMF Loan to Pay for Russian Gas

December 17, 2009

Ukraine has convinced the International Monetary Fund to release a $2 billion bailout loan that will help the ex-Soviet nation pay for Russian natural gas and avoid a repeat of a January crisis that cut off gas supplies to Europe, a top Cabinet official said Friday.

Ukraine's Deputy Prime Minister Hryhoriy Nemyria said he secured the deal during a meeting with the IMF's leadership in Washington, D.C. earlier this week. "Ukraine has met the primary demands of the IMF," Nemyria said in a statement.

In October, the IMF halted a $3.8 billion portion of its bailout loan to Ukraine and demanded that the country's leadership resolve its budget crisis before the funds would be released.

Nemyria's spokeswoman Nataliya Lysova said part of the money will be needed to pay Ukraine's gas bill to Russia, which comes due early next month.

In January, a pricing dispute between Russia and Ukraine saw Russian gas monopoly Gazprom cut supplies to EU nations through Ukraine for two weeks, leaving millions of Europeans short of fuel in the middle of a harsh winter. Europe gets around 20 percent of its gas from Russia, most of it via pipelines that cross Ukraine.

Copyright 2009. Associated press. All rights reserved.

 

Nemyria said the IMF eased its position on the loan after seeing Ukraine's progress in finding a solution to the budget crisis. "We reached a compromise between the National Bank of Ukraine and the Finance Ministry," he said.

In October, the lender froze the fourth and final portion of its $16.5 billion bailout loan to Ukraine after parliament passed a law boosting wages by 20 percent. The IMF said Ukraine's battered economy could not afford such a move, and urged President Viktor Yushchenko to veto the law. But he signed it Oct. 30.

Analysts have blamed Ukraine's upcoming presidential elections, scheduled for January 17, for the populist wage and pension hikes that have exacerbated the budget deficit .

As for the remaining $1.8 billion in IMF bailout money, Lysova said it remains frozen. "We probably won't see movement on that until after the elections," she told the AP.

Copyright 2009 Associated Press. All rights reserved.