IMF Approves $16.4 Billion Emergency Loan For Ukraine

November 6, 2008 11:54 a.m. EST

Washington, D.C. (AHN) - The International Monetary Fund announced on Thursday the approval of a $16.4 billion emergency loan for Ukraine to help the eastern European nation's economy recover.

Kiev is one of the hardest hit by the global financial crisis, reflected in the drastic drop in the price of steel, its number one export, fast climbing inflation rate and dipping stock values.

Because of the economic slow down, some Ukrainian banks have frozen deposits in a bid to stem massive withdrawal of cash amid fears of job losses.

The condition of the loan signed by Ukraine with IMF covering two years is for the eastern European nation to agree to financial reforms in exchange for an immediate outlay of $4.5 billion (3.5 billion euro).

It includes higher bank deposit insurance to boost confidence in Ukraine's banking system, national budget and spending reduction and for the government to have a stake in lenders, if necessary.

IMF deputy managing director and acting chairman Murilo Portugal said the swift approval of the emergency loan seeks to relieve the stress on the Ukrainian economy, particularly its banking system.

Because of the decline of Kiev's manufacturing sector by 5 percent in September and the other after effects of the global financial crisis, Ukraine will enter a recession period in 2009 with its economy expected to dip by 3 percent, said the IMF. The emergency loan seeks to reduce Ukraine's inflation to at least 25.5 percent for 2008.