(Adds president's comments at IMF meeting, Fitch)
KIEV, Jan 23 (Reuters) - Ukraine must take tough budget decisions if it is to have a good chance of continuing its programme of support from the International Monetary Fund, President Viktor Yushchenko's top economic aide said on Friday.
An IMF team is in Kiev to review progress before disbursing the next part of a $16.4 billion loan, and economic aide Oleksander Shlapak said it had queries on a range of issues including the budget deficit and how Ukraine was going to finance its energy imports after the latest gas row with Russia.
The head of the delegation, Ceyla Pazarbasioglu, met Yushchenko on Friday at the beginning of its mission, due to last at least two weeks.
The IMF had set a number of monetary and fiscal conditions to be met quarterly, including a balanced 2009 budget and a looser currency policy.
Parliament, however, passed a budget with a deficit of 3 percent of gross domestic product. The economy, forecast to shrink by up to 5 percent this year, faces higher gas prices agreed this week with Russia after a three-week stand-off.
"The mission has many questions and these questions concern the budget deficit and also gas problems which have arisen," Shlapak told a news conference.
"They are also demanding an answer as to how we will balance our finances and energy sources.
"I assess the possibility of continuing (the programme) as quite high only if Ukraine, as it did late last year, shows its readiness to take difficult decisions on the budget and for companies and for our people... not through words but through its decisions."
The head of Fitch Ratings for emerging Europe signalled on Thursday that it would likely again cut Ukraine's credit rating -- governing how much it costs Kiev to borrow -- if the IMF said the country was off-track on its commitments.
DOMESTIC ROW
Yushchenko and Prime Minister Yulia Tymoshenko assured the IMF on Dec. 30 that they were willing to amend the budget. But the two former allies have been at loggerheads for months now and their rowing has delayed policy making.
The president told IMF delegation head Pazarbasioglu on Friday that the anticipated economic contraction posed serious problems for meeting budget targets.
"As the IMF mission is an assessment, it is very important for Ukraine to implement what is set down in the memorandum," he said in comments posted on the presidential Web site.
"We are talking about achieving a plan of macro-economic stability. There are many difficulties in both specific sectors and in the overall budgetary process."
Yushchenko said he wanted to hear the IMF's proposals on forecasts set down in the budget.
"There are huge difficulties at the moment with the budget," he said. "Many of them lie within the context of political decisions which must be taken by the prime minister and parliament, questions requiring political will." (Reporting by Sabina Zawadzki; editing by Patrick Graham)