The International Monetary Fund has reached an agreement with Ukraine on a $16.5 billion loan to help the country confront the ongoing financial and economic crisis. IMF managing director Dominique Strauss-Kahn said on Sunday that agreement had been reached between the IMF staff mission to Ukraine and the government, although it still needed to be formally ratified by the IMF board.
The 24-month stand-by loan will be conditional on parliamentary approval of legislation to support the country's banks. Ukraine will also need to balance its budget and address the current-account deficit problem, according to a separate statement from the Kiev-based central bank.
It is hoped that the loan will provide a framework within which it will be possible to try to increase financial stability and rebuild confidence among investors, although there does seem to be a long hard road to go down here.
The Ukraine central bank has pledged to support the country's banks and has injected more than 16.25 billion hryvnia ($3.13 billion) into the banking system over the last month. It also took control of Prominvestbank (one of the country's larger lenders) and promised an injection of 5 billion hryvnia into the bank to help the lender "renew its financial stability'' after a run by depositors.
Really there does seem to be a very severe credit crisis raging in Ukraine (and across Eastern Europe) at the present time, and the macroeconomic consequences are hard to forsee, although recession does seem imminent.
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