The Washington Post

UKRAINE LAWMAKERS UNITE TO PASS IMF LOAN MEASURE

Philip P. Pan

Washington Post Foreign Service

30 October 2008

Ukraine's fractured parliament broke a political deadlock Wednesday and
gave initial backing to a legislative package negotiated with the
International Monetary Fund as a condition for a $16.5 billion loan to
bolster the nation's reeling economy.

The vote came as the IMF announced a $25.1 billion bailout for Hungary
with the support of the European Union and the World Bank in an attempt
to contain a mounting currency crisis across Central and Eastern Europe
that analysts fear could spark a wave of defaults on debts held by
Western Europe.

Ukraine's currency, the hryvnia, tumbled another 12 percent against the
dollar Wednesday, hitting a new low as banks and companies sold the
local currency to gather funds to pay an estimated $1.5 billion in
foreign loans due at the end of the month.

The chairman of Ukraine's central bank, Volodymyr Stelmakh, said at a
news conference that failure to obtain the IMF loan would accelerate
inflation and push the country to the brink of default. Without the IMF
package, he said, "we will not be able to show our creditors that we
have a reliable mechanism to repay our debts."

The prospects for the bailout appeared to improve as the nation's
feuding president and prime minister set aside a dispute over early
elections that had paralyzed the political system for weeks. They then
cobbled together a 248-vote majority in the 450-seat parliament in favor
of the bills requested by the IMF.

The legislation, which includes cuts in welfare spending, a freeze on
the minimum wage and measures intended to strengthen Ukraine's shaky
banks, was due for a final vote Thursday after changes in committee.

The action came after supporters of President Viktor Yushchenko backed
off demands that the legislature first approve funding for parliamentary
elections that he has called in December. His rival, Prime Minister
Yulia Tymoshenko, who opposes the elections, then withdrew her version
of the economic package and endorsed the president's.

In a statement, Tymoshenko expressed confidence the parliament would
approve the package Thursday and raised the possibility of
reestablishing the ruling coalition with Yushchenko that collapsed last
month.

"Today, we reached a compromise and did what our country needs," she
said.

But it was unclear whether the president and prime minister, former
allies in the Orange Revolution demonstrations that brought Yushchenko
to power in 2004, had resolved their stalemate over early elections and
whether it might still derail the IMF loan.

After resisting for weeks, arguing it would be irresponsible to hold
elections during the financial crisis, Tymoshenko allowed parliament on
Wednesday to consider a bill put forward by Yushchenko's party to
allocate about $70 million to fund the elections. With her party
withholding support, however, the proposal fell four votes short of
passing.

Afterward, leaders of the president's parliamentary faction told
reporters they would try to attach the election funding as an amendment
to the economic package on Thursday.

"If that happens, it will undermine and put at risk the whole
anti-crisis package," Hryhoriy Nemyria, deputy prime minister for
European integration and an ally of Tymoshenko's, said by telephone from
Kiev. "If this materializes, there's no chance the package will pass. We
will not support it."