The International Monetary Fund reached agreement with Ukraine on a $16.5 billion loan to help support the nation's financial system as turmoil in global credit markets and recession concerns roil the eastern European country.
The 24-month stand-buy loan will be conditional on parliamentary approval of legislation to support the country's bank, the Washington-based lender said in an e-mailed statement today without elaborating. Ukraine will also need to balance the budget and address the current-account deficit, the Kiev-based Ukrainian central bank said in a separate statement.
The loan may ensure financial stability and rebuild confidence among investors, who've shunned riskier emerging- market assets in a flight to safety. Ukraine is the least creditworthy of Europe's transition economies measured by the cost of credit-default swaps, which protect bondholders against default.
``This program is focused on the essential upfront measures needed to maintain confidence and economic and financial stability,'' IMF Managing Director Dominique Strauss-Kahn said in the statement. ``The strength of the program justifies the high level of access, equivalent to 800 percent of Ukraine's quota in the Fund.''
Fitch Ratings on Oct. 17 cut Ukraine's credit rating to B+, four steps below investment grade, citing the currency's weakness, instability in the banking system and risks to economic growth.
International credit rating companies say the threat to Ukrainian banks has intensified because of the seizing-up of global credit markets, the high inflation rate, a widening current-account deficit and political instability.
The central bank pledged to support the banks and has injected more than 16.25 billion hryvnia ($3.13 billion) into the banking system this month, almost three times the figure it loaned in September. It also took control of Prominvestbank in recent weeks and promised an injection of 5 billion hryvnia to help the lender ``renew its financial stability'' after a run by depositors.