(Adds president on budget deficit)
KIEV, Feb 26 (Reuters) - Ukrainian President Viktor Yushchenko agreed to hold talks on Friday with his rival, Prime Minister Yulia Tymoshenko, on a common agreement they hope will restart the stalled $16.4 billion IMF loan programme.
Yushchenko met local IMF officials on Thursday, a day after Standard & Poor's became the second ratings agency to downgrade Ukraine on concerns that rowing among the political elite would derail the loan just as the country descends into a deep recession.
Yushchenko said the IMF would be "flexible" on the 2009 budget deficit -- a sticking point in the talks with the fund.
"Tomorrow morning I will hold a meeting with representatives of the parliament, the prime minister and the management of the central bank," Yushchenko told a meeting of officials from the IMF, as well as from the World Bank.
"Together with the prime minister and the chairman of parliament, we have prepared a letter of intent to the IMF," he said.
The IMF effectively suspended its programme earlier this month and delayed handing out a second tranche worth $1.84 billion after several of its conditions had been broken.
Its chief complaint appeared to have been a 3 percent budget deficit for this year, despite a clear condition set out in November that the budget must be balanced.
Analysts have said in recent days that the IMF could soften its stance on the deficit and several senior officials have said that the IMF would have no problem with a deficit as large as 3 percent of gross domestic product.
Yushchenko was cited by his press service as later saying the IMF is now allowing for "a great amount of flexibility" in their assessments of amongst other things the budget deficit.
He added the budget had to be changed but did not say in which way. The budget has also been criticised for overly optimistic economic growth forecasts that skews spending plans.
The IMF was not immediately available for comment. (Reporting by Sabina Zawadzki; Editing by Stephen Nisbet)