IMF

Ukraine gets $16.5 billion IMF loan; Hungary is next

The International Monetary Fund will lend Ukraine $16.5 billion and give Hungary “a substantial financing package” as the turmoil in global credit markets and recession concerns sweep across eastern Europe's emerging markets.

The 24-month Ukrainian loan is conditional on parliamentary approval of legislation to support the country's banks, the Washington-based lender said yesterday in a statement. The Hungarian deal, which will be announced this week, was reached in cooperation with European Union.

The IMF, which last week agreed to lend Iceland $2.1 billion, is helping shore up economies in eastern Europe as investors, stung by losses in developed nations, sell riskier emerging-market stocks, bonds and currencies. Ukraine, the first nation in the region to receive IMF help in the crisis, must do more to reverse the flight of capital, economists said.

“The money is only half of the issue, conditionality is key,” said Timothy Ash, head of emerging-market research at Royal Bank of Scotland Group Plc in London. “We hope the fund is maintaining its push for a more flexible exchange rate, far- reaching reforms in the banking sector and more privatization.”

Belarus last week asked the IMF for at least $2 billion after its banks lost access to financing and Pakistan may need an emergency loan to help repay debt.

(Published by Bloomberg - October 27, 2008)