BRUSSELS, Nov. 17 – The Ukrainian government plans to re-write its 2010 draft budget as it seeks to persuade the International Monetary Fund to resume lending to the country, Foreign Minister Petro Poroshenko said Tuesday.
The IMF, citing lack of reforms in Ukraine, postponed its $3.4 billion Standy loan installment earlier this month, but Poroshenko said the government planned to invite an IMF team back to Kiev before the end of the year.
“We have a new draft of the budget and we’re preparing a special letter from the prime minister and finance minister to the IMF and a separate letter from the governor of the National Bank,” Poroshenko said in a Bloomberg News interview in Brussels. “It has helped a lot to put cooperation with the IMF on track and we expect the IMF mission to return to Ukraine by the end of this year.”
Poroshenko, who also heads the National Bank of Ukraine’s Council, a strategic policy body, said he thought payment of the next installment of the IMF loan to Ukraine would be “possible” in December.
The government is facing a major budget deficit this year after tax collections had plunged due to economic crisis.
Ukraine received $10.6 billion in three installments from the IMF over the past 12 months, with the money being part of a $16.4 billion two-year Stand-by loan approved in November 2008.
Prime Minister Yulia Tymoshenko recently admitted that the government has managed to maintain spending schedule this year only due to the support from the IMF.
But the government at the same time failed to implement economic reforms, including its earlier promise to hike domestic natural gas prices from September 1, forcing the IMF to recently postpone indefinitely the next installment.
Tymoshenko has refused to take drastic budget spending cuts and implement other unpopular measures amid fears of a political backlash at the next presidential election due on January 17, 2010.
Tymoshenko is currently trailing behind opposition leader Viktor Yanukovych in opinion polls, but is ahead of incumbent President Viktor Yushchenko.
Countries including France and the U.K. announced at a meeting of European Union foreign ministers in Brussels on Tuesday that they want “strict conditionality” on the next installment of IMF loans for Ukraine.
“There’s real disappointment among many of Ukraine’s friends over the inability to enact reforms,” Pierre Lellouche, France’s European affairs minister, told reporters.
The suspension of IMF financing prompted Fitch Ratings on Nov. 12 to cut Ukraine’s long-term foreign-currency credit rating to B- from B, six levels below investment grade and on par with Argentina and Lebanon. (nr/bbg/ez)