Steel mill at Donetsk, Ukraine: policy package designed to help meet needs partly created by collapse of steel prices (photo: Viktor Korotayev/Reuters)
GLOBAL FINANCIAL CRISIS
The loan is still subject to approval by the IMF's management and Executive Board, and would follow approval of legislative changes in Ukraine.
IMF Managing Director Dominique Strauss-Kahn said Ukraine "has developed a comprehensive policy package designed to help the country meet the balance of payments needs created by the collapse of steel prices, and the global financial turmoil and related difficulties in Ukraine's financial system."
Strauss-Kahn said the authorities' program was intended to support Ukraine's return to economic and financial stability, by addressing financial sector liquidity and solvency problems, by smoothing the adjustment to large external shocks and by reducing inflation. At the same time, it would guard against a deep output decline by insulating household and corporations to the extent possible.
"The IMF is moving expeditiously to help Ukraine, and this program is focused on the essential upfront measures needed to maintain confidence and economic and financial stability. The strength of the program justifies the high level of access, equivalent to 800 percent of Ukraine's quota in the Fund," Strauss-Kahn added.
Initial deal with Iceland
The IMF announced an initial agreement October 24 with Iceland on a $2.1 billion two-year loan to support an economic recovery program to help the island restore confidence in its banking system and stabilize its currency.
The IMF, which has announced its readiness to lend billions of dollars to support nations hit by fallout from the global financial turmoil, is holding talks with several countries about possible new lending programs, as well as advising governments how to react to the economic downturn.
The IMF is in discussions with a number of other countries about possible financing needs, and is providing confidential policy advice to governments in emerging and developing economies on how to adapt to the current turmoil.
Loanable funds
The IMF has more than $200 billion of loanable funds and can draw on additional resources through two standing borrowing arrangements with groups of IMF member countries.
Strauss-Kahn, who helped spearhead the international response to the global financial turmoil during the IMF-World Bank Annual Meetings in Washington on October 10-13, has emphasized the IMF's readiness to lend quickly to member countries that need help during the ongoing crisis through its emergency financing procedures.
The IMF says the financial turmoil hitting advanced economies is starting to slow growth in many emerging markets. The world economy is entering a major downturn in the face of the most dangerous financial shock in mature financial markets since the 1930s, according to the IMF's World Economic Outlook.
Comments on this article should be sent to imfsurvey@imf.org
