UPDATE 1-IMF says to start new loan talks with Ukraine next week

Fri Nov 30, 2012 11:30am EST

KIEV Nov 30 (Reuters) - The International Monetary Fund will send a mission to Ukraine next week to start talks on a new loan programme, its office in the former Soviet republic said on Friday.

Next year, Ukraine is due to pay foreign creditors $9.1 billion in principal and interest, up from $6.5 billion this year. The 2013 sum includes $6.4 billion owed to the IMF.

"At the request of the authorities, an IMF mission headed by Mr. Christopher Jarvis will visit Ukraine on December 7-17 to initiate negotiations on a new Stand-By Arrangement," Max Alier, the IMF Resident Representative in Ukraine, said in a statement.

The IMF suspended lending to Ukraine in early 2011 after the Kiev government refused to raise household gas and heating prices, an unpopular move which the Fund sees as essential to control the budget deficit.

The Fund has also urged Ukraine to allow more hryvnia exchange rate flexibility and carry out other reforms aimed at improving the business climate and avoiding a build-up of debt.

Central bank chairman Serhiy Arbuzov told local magazine "Kommentarii" on Friday that Kiev hoped to refinance the maturing IMF debt.

Ukrainian Prime Minister Mykola Azarov told Reuters last month his cabinet wanted to secure fresh IMF lending without raising household gas and heating prices.

Ukraine's economy, dominated by steel exports, shrank by 1.3 percent year-on-year between July and September due to falling global demand for the metal while the state budget deficit nearly tripled in January-October to about $4 billion.

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