Ukraine Reforms Get Boost From $1.9-Billion IMF Loan

Ukraine’s free-market reforms, launched belatedly but now apparently on course, have received a boost from the International Monetary Fund with approval of $1.9 billion in loans to help implement them.

The IMF decision, made in Washington on Friday and announced by Ukrainian officials Saturday, became possible last week when Parliament passed a tight, IMF-blessed 1995 budget.

The loan approval will help Ukraine pay its energy bills and start receiving $4 billion in aid promised last July by the Group of Seven major industrialized nations.

“We hope that now Ukraine will get more trust in the world and that private capital will come to us,” acting Foreign Minister Hennady Udovenko told the Interfax-Ukraine news agency.

Ukraine will receive from the IMF a one-year standby credit of about $1.5 billion, plus an additional $392 million that is part of a special deal for post-Soviet economies undergoing transition to the free market.

The latter loan is a part of a package approved after the government of President Leonid D. Kuchma, who took office in July, agreed with the IMF on a radical program of tight credit, speedy privatization and economic reforms. A first installment of $350 million came last autumn, and it went to pay for oil and gas imports from Russia and Turkmenistan that Ukraine could no longer afford.

Approval of the new IMF credits was conditioned on Parliament’s passage of a budget with a deficit within IMF limits--7.3% of the gross domestic product.

Acting Finance Minister Petro Hermanchuk told lawmakers that the budget reduces overall spending by 4% from last year. It apparently includes deeper cuts in defense spending.

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U.S. officials preparing for President Clinton’s visit to Ukraine and Russia next month welcomed the IMF decision.

“Ukraine’s government has embarked quite properly and quite courageously on the path of economic reform,” a Clinton Administration official said. “This entails . . . hardships and requires the support of the international community to succeed over time.”

Although Parliament on Tuesday had voted no confidence in the same government that submitted the tight budget, Ukraine’s need for foreign credits is so desperate that even Oleksandr O. Moroz, the socialist Speaker of Parliament, urged lawmakers to approve it.

Ukrainian officials say the IMF’s decision paves the way for other credits, including $500 million from the U.S. Export-Import Bank and $150 million from Japan.