UPDATE 3-Ukraine expects IMF help soon, sets out measures

(adds economy minister comment, details of parliament)

KIEV, Oct 22 (Reuters) - Prime Minister Yulia Tymoshenko said on Wednesday she hoped Ukraine would receive “substantial” international financial aid next week and set out measures aimed at shielding the country from what she called “stagnation”.

Ukrainian officials say the ex-Soviet republic could receive a credit of up to $14 billion from the International Monetary Fund. An IMF mission has been in Kiev for the past week.

Tymoshenko said a series of measures, some of which are IMF conditions for a loan, needed to be approved by parliament -- back in session by the order of the president after he dissolved it earlier this month and called an election.

The measures include a balanced budget through cutting social payments and the creation of a stabilisation fund.

“Then we can hope that at the beginning of next week Ukraine will be granted substantial international financial aid that will help protect it from any negative influences of the world financial crisis,” she told reporters after a cabinet meeting.

“We need to understand that revenues from taxes, which are vital for the budget, will be seriously weaker because today stagnation has started all around the world and it will affect Ukraine.”

Minutes of the meeting showed her telling ministers that the IMF would make a decision on Wednesday. She later told reporters her comments were not to be taken as an official announcement.

Economy Ministry Bohdan Danylyshyn later said he expected the Fund to decide on the size of the credit on Thursday.

“As the prime minister said, a meeting is planned for today and we will be told the final sum,” he told reporters.

He also said parliament, blocked by disputes, would adopt legislation on Thursday to tackle the world crisis.

The IMF, Danylyshyn said, “supports the provisions of the draft legislation”.

The IMF office in Kiev offered no comment.


Analysts are worried whether the government, firms and banks will be able to refinance their debt as global lending grinds to a halt. Credit rating agencies have cut their ratings or outlooks on Ukraine in recent weeks.

The hryvnia currency hit an all-time low this month and the central bank has a difficult balancing act between spending its reserves on propping it up or letting it weaken, a course that would give up one of the few anchors in the economy.

Tymoshenko said on Tuesday that some of the potential IMF fund would go towards bolstering the central bank’s reserves.

The rest, she said, would go towards propping the banking sector. The government set out measures to bolster the sector, promising to help ailing banks but also proposing a two-year ban on dividends to channel profits into raising capital.

“Of course, if the state helps banks, it will buy additional stakes which will then become state property,” she said.

“We see increased capitalisation of banks as part of stabilisation of the banking system. This law foresees that for two years the banking system will issue no dividends and profits will be channelled into funds to boost bank capitalisation.”

Other moves included a balanced budget for this year and next through capped social spending, one of Tymoshenko’s trademarks.

President Viktor Yushchenko dissolved parliament two weeks ago and called a December election after the collapse of a coalition of groups led by the president and prime minister.

Yushchenko suspended the dissolution order this week, allowing parliament to sit for several days to pass anti-crisis measures and approve funding for the election.

Tymoshenko has denounced the election as “reckless” against the background of the world crisis and her allies in the chamber have blocked debate for two days. But she said she hoped parliament could consider and pass the legislation on Thursday. (Reporting by Natalya Zinets; Writing by Sabina Zawadzki; Editing by Andy Bruce)