The Ukrainian government will spend $1.3 billion to shore up three leading banks devastated by the global financial crisis as part of a $16.4 billion rescue loan program with the International Monetary Fund, the prime minister said Wednesday.
Yulia Tymoshenko announced a decision to recapitalize the banks — Ukrgaz, Rodovid and Kiev — to save them from collapse and to boost the entire financial sector, which has been hit by a confidence crisis. The move will give the government majority stakes in those banks.
The IMF granted the aid — over half of which has already been transferred in two installments — on the condition that the money be spent on such stabilzation measures.
The IMF’s resident representative in Ukraine, Max Allier, praised the decision and suggested that the fund could increase the size of the third installment of the loan from $2.8 billion to $3.2 billion.
An IMF mission will be arrive in Kiev later this month to assess whether Ukraine is meeting the organization’s criteria of keeping government spending and inflation under control.
“We welcome all the progress that has been made in recent months toward restoring confidence in the banking system of Ukraine,” Allier said at a joint news conference with Tymoshenko.
Tymoshenko voiced hope that parliament would quickly adopt a series of laws on easing bank recapitalization procedures and increasing the independence of the central bank in order to receive the third installment, which is expected to come by July.
Ukraine was among the worst-hit countries in Europe by the global slowdown.
The economy has plunged by 21 percent in the first quarter of this year, according to parliamentary auditors, mainly due to sinking global demand for steel, the heart of the national economy.
Tymoshenko’s government has so far refused to release official data on economic performance this year.
The national currency has lost about 35 percent of its value to the dollar as exports fell and investors fled emerging markets.
Observers say political infighting between former allies Tymoshenko and President Viktor Yushchenko has exacerbated the effects of the crisis. Presidential elections are scheduled to be held by January and both politicians have vowed to run.
