2010.07.0710:22:00UTC+00Ukraine To Adopt Unpopular Steps To Cut Budget Deficit

The Ukraine government will take unpopular steps and raise energy prices to reduce the budget deficit and meet the conditions stipulated by the International Monetary Fund, Deputy Prime Minister Sergiy Tigipko told reporters on Wednesday. The budget deficit will fall to 4.99% of GDP this year, he said.

The government should satisfy the IMF conditions to get the final approval for the US$14.9 billion loan. The standby arrangement with IMF was announced on July 3. The agreement reached with the authorities is subject to approval by IMF Management and the Executive Board.

The Executive Board will make decision on loan in late July, following approval of legislative changes relating to the budget and financial sector. The IMF stipulates a reduction in general government deficit to 5.5% of GDP this year and 3.5% in 2011.

The finance ministry had announced Eurobond sale of EUR 2 billion this year, with a maturity of up to 10 years. The government selected VTB Capital, JPMorgan Chase & Co., and Morgan Stanley to manage the deal.

Following the new US$14.9 billion IMF loan agreement, Fitch Ratings upgraded sovereign rating of Ukraine, yesterday. The rating agency said the agreement supports confidence in the policy and financing outlook, reduces the risk of macroeconomic and financial instability.

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