UPDATE 2-Ukraine PM says tough times ahead without IMF funds

* PM says "extremely difficult" period ahead

* Says continued co-operation with the IMF necessary

* But finance minister says no risks to economy, currency

(Adds Tymoshenko, details)

By Natalya Zinets

KIEV, Nov 11 (Reuters) - Ukraine's economy will undergo an "extremely difficult" period without a $3.8 billion bailout from the International Monetary Fund, Prime Minister Yulia Tymoshenko said on Wednesday.

Her comments mirror those of Deputy Prime Minister Hryhory Nemyrya who said payment for Russian gas will become increasingly difficult without the IMF cash -- part of a $16.4 billion programme to counter economic crisis.

The IMF refrained from releasing the funds after parliament passed a bill raising the minimum wage by over 20 percent. President Viktor Yushchenko -- bitter rival to Tymoshenko -- brought the law into force by approving it last month.

This has sparked accusations from Tymoshenko that Yushchenko deliberately sabotaged the IMF deal ahead of a presidential election in January in which both will run. With public support of 5 percent or less, Yushchenko is unlikely to win re-election.

Some analysts have been worried that state energy firm Naftogaz would be unable to pay for Russian gas, sparking an energy row similar to one in January which led to supply cuts and left hundreds of thousands of Europeans in the cold.

"We consider that continuing Ukraine's cooperation with the IMF is necessary," Tymoshenko told a gathering of ambassadors from Group of Eight nations.

"Following the road to the end of the presidential campaign, to the stabilisation of the political situation in Ukraine and overcoming the financial-economic crisis without the fourth tranche of IMF funds will be extremely difficult," she said.

Tymoshenko has consistently portrayed herself and her government as coping well with a deep economic crisis despite obstruction from Yushchenko, driven by personal gain.

Former central banker Yushchenko accuses Tymoshenko of driving the country to ruin through populist policies funded by billions of borrowing that would have to be repaid by future generations.

FUNDS NOT CRUCIAL?

IMF Chief Dominique Strauss-Kahn said last week the fund was unlikely to continue cooperation with Ukraine until after the election, when observers say some political consensus and less infighting is likely to ensue.

Analysts have said Ukraine could survive without the funds until after the election although the government may be forced to raise already sky-high yields on domestic bonds to attract more buyers or pressure the central bank to print money to cover this year's budget deficit.

Acting Finance Minister Ihor Umansky appeared to contradict Tymoshenko on Wednesday by saying the IMF funds were not vital.

"This tranche is not crucial for ensuring balance on the currency markets. I do not see any risks to the economy (if the tranche is delayed)," Umansky told journalists.

Nemyrya said on Monday Ukraine would use the IMF's Special Drawing Rights -- not linked to the bailout -- to pay for gas in November but that future payments may be at risk if the programme is not restarted.

The IMF injected about $250 billion of liquidity for its members in August, including about $2 billion for Ukraine. (Writing by Sabina Zawadzki; Editing by Ruth Pitchford)