(Adds comment, parliamentary debate)
By Natalya Zinets
KIEV, Oct 29 (Reuters) - Ukraine's parliament on Wednesday considered legislation to secure billions of dollars in aid from the IMF, with the central bank warning that the country faced default and high inflation unless deputies approved it quickly.
As the assembly debated, free of the protests over an early election that have halted proceedings for a week, Ukraine's hryvnia currency quickly plunged to a record low.
Central bank chairman Volodymyr Stelmakh warned that failure to secure the $16.5 billion in credits would lead to "spiralling inflation, double-digit inflation -- very high. As well as moral discredit and declaring default".
The International Monetary Fund and Ukraine last weekend clinched a preliminary agreement on the credits, seen as vital to stabilise Ukraine's financial and banking system and shield the ex-Soviet state from the effects of the world-wide crisis.
Parliament's chairman, Arseniy Yatsenyuk, said approval of the IMF programme depended directly on their actions.
"I spoke yesterday with the IMF. Its examination of the question of extending credits to Ukraine depends on the actions of Ukraine's parliament," Yatsenyuk said.
"If we vote today, they examine it today. If we vote tomorrow, they examine it tomorrow."
Parliament had been deadlocked over President Viktor Yushchenko's dissolution of the chamber and call for a snap election in December.
Prime Minister Yulia Tymoshenko, the president's estranged ally, has denounced as "criminal" the notion of an election amid the world financial crisis. Her supporters had blocked debate to guard against any attempt to finance the election.
Tymoshenko urged deputies to back an abbreviated, compromise version of legislation, drafted after days of consultations, intended to meet what are believed to be IMF demands.
The Fund has not made public the details of any conditions.
IMF IMPRESSED
But IMF mission chief Ceyla Pazarbasioglu told reporters she was "very impressed" with plans to recapitalise banks and pursue a "very strong monetary and exchange rate policy, prudent fiscal policies".
"We think there is vision and foresight in terms of looking forward and understanding the challenges that the country may face and taking action to address those challenges," she said.
She said the loan would come in tranches.
On the currency market, the hryvnia tumbled to 7.05/7.20 to the dollar despite new intervention, with the central bank offering to sell dollars at 5.7 against 5.5 on Tuesday.
But central bank chief Stelmakh said that, subject to final agreement with the IMF, the hryvnia would be "no weaker" than 6.0 to the dollar by year-end.
He said Ukraine's foreign debt situation was complicated by possible demands for early repayment of corporate loans in connection with recent downgrades of Ukrainian borrowers.
"If the IMF programme is confirmed, it will mitigate against any request for early return of credits in the corporate sector and allow for a balance between supply and demand," he told a news conference. "We took due account of this and that's why we approached the IMF."
The president's top economic adviser, Oleksander Shlapak, said low demand for key exports, like steel and chemicals, was likely to plunge Ukraine into recession next year.
He predicted negative growth of 2 percent and a decreased pace of industrial output growth to a maximum 2 percent. The government's growth forecast for 2008 stands at 8 percent. (Writing by Ron Popeski; editing by Stephen Nisbet)