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UPDATE 2-IMF sees more work to do on Ukraine credit deal

Published 04/28/2010, 09:26 AM
Updated 04/28/2010, 10:12 AM

* Issues have to be clarified, says Fund's Lipsky

* They include fiscal consolidation, financial reform

* More talks seen in Kiev soon

(Adds detail)

KIEV, April 28 (Reuters) - Ukraine needs to provide more detail on fiscal and financial reform plans before loose ends on a new multi-billion-dollar credit programme from the International Monetary Fund can be tied up, the IMF said on Wednesday.

"Progress has been made in many areas. At the same time, outstanding issues remain to be clarified, including fiscal consolidation, in addition to financial sector and other reforms," John Lipsky, IMF First Deputy Managing Director, said in a statement carried on the Fund's Web site.

"There was a broad consensus on the need to entrench fiscal and financial stability and to pave the way for sustainable recovery ... Discussions are expected to continue in Kiev in the coming weeks," Lipsky said after meeting in Washington with Ukrainian Deputy Prime Minister Sergey Tigipko.

Tigipko, speaking in Kiev last week, put the size of the 2 1/2 year credit programme sought by the ex-Soviet republic at $12 billion, though since then reports from the Ukrainian side have suggested $19-20 billion might be in the offing.

The new administration of President Viktor Yanukovich is anxious to get a new IMF stand-by programme under way to help restore investor confidence in Ukraine's struggling economy, which was hit hard by the global downturn.

At the end of 2008 the hryvnia lost more than 60 percent of its value against the dollar because of shrinking markets for Ukraine's main export industries of steel and chemicals and huge foreign debt repayments. Hampered by a lack of investment and loans, the economy shrank by more than 15 percent in 2009.

A $10.4 billion bailout programme was suspended last year by the IMF because the previous Ukrainian leadership reneged on pledges of financial restraint.

Parliament on Tuesday hastily approved a 2010 state budget with a relatively tight deficit target of 5.3 percent of gross domestic product, one of the key requirements of the IMF for further credit. The government has made a commitment to the IMF to try to hold its budget to 6 percent of GDP. The previous administration of Mykola Azarov was able to nail down the detail of the draft budget only after Ukraine received a 30 percent discount on the price of its huge gas purchases from Russia in an agreement on April 21.

Ukrainian officials suggest that an IMF mission visit to Kiev next month will be a decisive one, leading to a new programme being agreed.

(Writing by Richard Balmforth, editing by John Stonestreet)

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