Negotiators from the International Monetary Fund (IMF) and the Ukrainian government agreed on Friday to an additional 3.3 billion dollar loan to the cash-strapped former Soviet republic, according to dpa. A "technical agreement" on the loan terms has been reached, but Ukraine's parliament needs to make changes to banking law for the new credit to go forward, said Ceyla Pazarbasioglu, head of the IMF mission to Ukraine. Ukrainian and IMF negotiators had agreed on the text of changes to banking law needed for Ukraine to qualify for this third trache of money, and the success of the Friday agreement was contingent on Ukraine's often-fractious parliament passing the new rules, Pazarbasioglu said. "It is extremely critical that they (Ukraine's parliament) get this done," she said. The credit will be the third tranche of part of a larger IMF loan programme to Ukraine begun in November 2008, the Interfax news agency reported. The IMF government could transfer the money to Ukraine in early August, Korrespondent magazine reported. The IMF delayed paying out a scheduled second tranche for more than two months, because of unwillingness by Ukraine's parliament and government to enact market reforms insisted on by the Fund. Ukraine is one of the world's hardest-hit nations by the international financial crisis, with its GDP on track to shrink as much as 18 per cent in 2009, according to IMF estimates. IMF policy on Ukraine has long insisted Kiev among other reforms halt state subsidies to energy retail prices, reduce deficit spending, and strengthen independence of the national bank, in order to receive loans. A top IMF priority has been to force Ukraine's government to devote most IMF money received to shoring up its national banking system. European banks particularly from Germany, Sweden and Austria hold substantial shares of Ukrainian banks whose collapse, industry analysts predicted, could trigger more bank failures across the continent. The IMF-stipulated loan conditions are widely unpopular in Ukraine. Retail customers of some Ukrainian banks, which have received hundreds of millions of dollars of support from the IMF, have been unable to withdraw on personal savings accounts since October. Tymoshenko has criticised the IMF loan conditions, saying the money would be better spent balancing Ukraine's national budget and paying state salaries, rather than shoring up banks which have substantial foreign ownership. Tymoshenko is a top candidate in Ukraine's Presidential campaign with a vote set for early January. Her critics have accused her of wanting the IMF money primarily so her government can remain solvent, and government services provided to voters, until the election.
