*IMF, Ukraine fail to reach agreement on resumed credit
*But progress seen, talks to continue in coming weeks
*IMF mission to return home on Friday
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By Richard Balmforth
KIEV, April 1 (Reuters) - The head of an International Monetary Fund mission visiting Ukraine said progress had been made in talks to resume a suspended $16.4 bailout programme to the country, but he indicated no agreement had yet been reached.
"I think we have made progress ... This has improved our understanding of the policy and positions (of Ukraine) which we can go over in the coming weeks," IMF mission chief Thanos Arvanitis told Prime Minister Mykola Azarov.
But he made it clear no outline agreement had been reached with Ukraine's new leaders to resume the credit programme which the Fund suspended last year because of breached promises to hold down social spending.
The IMF in Washington said the mission would return home as scheduled on Friday.
Both sides said talks on a resumption of credit to the ex-Soviet republic, whose economy has been hard hit by the global downturn would continue, over the coming weeks.
Azarov said talks in the last two days had been quite satisfactory. "My aides say that our talks with you are moving towards a completion of negotiations. Is that so ?," he said looking across at Arvanitis.
There was no indication of what issues were holding up an outline agreement. But Ukrainian officials have indicated the IMF is not satisfied with the size of Ukraine's proposed budget deficit for 2010.
The Fund disbursed about $10.5 of the bail-out programme but then suspended payment of a fourth tranche late last year when former President Viktor Yushchenko approved a parliamentary move to raise minimum wages and pensions despite earlier undertakings to the IMF not to do so.
A top economic aide of President Viktor Yanukovich, elected last February, said on Wednesday that the Ukrainian side was seeking a restart cooperation on the basis of a planned total deficit in state finances of 10 percent of Gross Domestic Product.
The Fund is believed to be pressing for a 2010 budget with a 6 percent deficit including any contributions to state energy giant Naftogaz and bank recapitalisation before it will disburse any funds.
Ukraine's new leaders say they expect a 2010 draft budget to have its first reading in parliament later this month. They see a resumption of the IMF programme, or even a new programme altogether, as vital to get the struggling economy back on to its feet and launch reforms.
But the new leadership has equally said it wants to go ahead with social spending plans that the IMF is averse to.
In Washington IMF spokesman Gerry Rice said the focus of the talks had been "on policies for 2010, including the budget and financial sector reforms."
"While significant progress has been made in many areas, a few issues remain outstanding. We will continue our discussions with the authorities in coming weeks," he said. (Additional reporting by Lesley Wroughton in Washington)