* Ukraine govt seeks new loan to repay $9 bln foreign debt
* Departing mission says Ukraine economy "vulnerable to
* IMF to return to Kiev for more talks in March
By Natalia Zinets and Olzhas Auyezov
KIEV, Feb 12 The IMF, leaving Ukraine with a
promise it would return to talks on a $15 billion loan, warned
Kiev it faced a second year of near-zero growth and was
vulnerable to further shocks due to its high current account
Rounding off a two-week visit to the former Soviet republic,
the IMF mission said it would return in March to continue talks
with the government on a new stand-by agreement to replace that
which lapsed in December.
Kiev has been in negotiation with the delegation since Jan.
29 on a new deal to help it service foreign debt repayments set
to peak at about $9 billion this year. Money owed by Ukraine to
the IMF itself accounts for about two-thirds of that sum.
Before the IMF mission left the Ukrainian capital for home
its chief, Christopher Jarvis, issued a stark warning that
Ukraine faced "serious challenges" in the year ahead.
"In the absence of corrective policies our forecast for 2013
is growth of 0-1 percent and a high current account deficit that
leaves Ukraine vulnerable to shocks," he said in a statement.
"With better policies Ukraine can achieve better outcomes
... We expect the mission to return to Kiev in March to continue
the discussions," he said.
Harking back to a deal-breaker in the past - the Kiev
government's refusal to raise gas prices in the home - Jarvis
said: "Large subsidies on gas and heating for households
continue to undermine Ukraine's budget and its balance of
Ukraine has, to date, signed seven loan deals with the Fund.
But the last one, which was also for $15 billion, was
suspended in early 2011 part way through when President Viktor
Yanukovich's government refused to make ordinary Ukrainians pay
more of the real cost of the gas it buys from Russia.
Ukrainians officials gave no indication of what concessions
the Kiev government might now - after a first round of talks -
be ready to make to come to terms with the Washington-based
Fund, one of its biggest foreign lenders.
NOT THERE YET
Ukrainian officials said the sides had given themselves more
time for negotiations.
"The (IMF) mission will carry out technical work in
Washington and prepare the next round of talks," Vitaly
Lukyanenko, a spokesman for prime minister Mykola Azarov, said.
"The mission is studying Ukraine's fiscal, exchange rate,
monetary and energy policies," he said.
Asked whether a memorandum on a new loan deal had been
drafted, Lukyanenko said: "We are not at that stage yet."
Separately, Economy Minister Ihor Prasolov told reporters he
expected another "technical" IMF mission to visit Kiev soon,
followed by a third mission which would be ready to finalise the
"The (third) mission will arrive, maybe in the second half
of March, in late March, and we, on both sides, will be more
prepared to move towards drafting a memorandum and we will
prepare for its signing," Prasolov said.
Though the IMF is clearly continuing to press for an
adjustment to utility prices under any new agreement, the
government well knows that such a step will significantly deepen
its unpopularity at home.
Ukraine's budget deficit doubled last year to $6.7 billion
or 3.8 percent of gross domestic product as the government of
Prime Minister Mykola Azarov boosted spending in the run-up to
the October parliamentary election.
The Fund has also argued the Ukrainian hryvnia,
pegged at about 8 per dollar since early 2010, is overvalued and
called for Kiev to allow greater exchange rate flexibility.