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Bonds News

Ukraine says may turn to Russia if IMF talks fail

* Deputy PM says govt has other funding options

* But IMF involvement still preferred

KIEV, June 8 (Reuters) - Ukraine may seek bilateral loans from Russia and other countries if the International Monetary Fund turns down its $19 billion loan request, Deputy Prime Minister Sergey Tigipko said.

In a first sign that the new government is unsure about the outcome of prolonged IMF talks focusing on the need for painful reforms, Tigipko said in a television talk show late on Monday that the crisis-hit, former Soviet republic had other options.

“I am sure we will have an IMF programme,” Tigipko told a show hosted by the local ICTV channel. “(But) we can theoretically discuss a case where there would be no IMF loan and nothing dramatic would happen.

“Ukraine would need to make relevant decisions and going for bilateral relations and bilateral loans, including with Russia, may be an option.”

Tigipko said the government could also borrow from the domestic and international capital markets but it still regarded IMF funding as preferable.

The IMF wants Ukraine to cut its budget deficit drastically through unpopular measures such as raising utility tariffs -- something newly-elected President Viktor Yanukovich may be hesitant to do.

An IMF mission was to visit Kiev on Wednesday to discuss economic policies that could be supported by its loan.

The Fund last year suspended Ukraine’s $16.4 billion rescue programme because the previous government reneged on promises of financial restraint.

The programme was also disrupted by politicians jostling for advantage in the run-up to elections, derailing cooperation with the IMF. Yanukovich, who enjoys strong Russian backing, was elected to power in February.

Analysts say Russian financial aid may come with political covenants.

In April, Yanukovich struck a deal with Moscow to lower prices for Russian gas by 30 percent in exchange for letting Russia’s navy stay in Ukraine’s Sevastopol port until 2042. (Writing by Olzhas Auyezov; Editing by Richard Balmforth and Mark Heinrich)

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