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Ukraine: Progess Made On Improving Economy

Washington, 26 March 1997 (RFE/RL) - International Monetary Fund (IMF) sources say Ukraine is making "some progress" on getting its economy in order to qualify for a new, three-year loan of as much as $3 billion.

The sources at IMF headquarters in Washington say, however, that almost everything awaits the Ukrainian parliament's approving the 1997 budget, adopting tax reforms and dealing with deregulation.

Ukrainian government officials have been working with IMF experts for many months now, putting together a program that can be supported by an Extended Fund Facility loan from the fund.

The aim had been to have the three-year loan ready to begin when Ukraine's one-year stand-by loan expired in early February. Kyiv drew the full stand-by credit of about $140 million to support its economic reform program. But IMF officials say the country was not ready to move into the three-year loan when the other program concluded.

The head of the IMF's department dealing with Ukraine, John Odling-Smee, led a fund delegation to Kyiv last week to review the situation and talk with government officials on progress in putting the requirements together for the new program.

Sources at the IMF say the Odling-Smee delegation was pleased with the progress they found, and saw a number of "positive signs" in Kyiv, but that in the end everything is still awaiting parliament's action.

IMF resident representative in Kyiv, Alex Sundakov, says the delegation wanted to "ensure the measures are implemented as soon as possible."

The need for quick action was emphasized last week by Ukraine's President Leonid Kuchma when he criticized both the government and parliament for allowing Ukraine's economy to go into "deep crisis."

In his annual state of the nation address to parliament on Friday, Kuchma criticized parliament for delaying adoption of the budget and the government of Prime Minister Pavlo Lazarenko for failing to solve delays in wage and pension payments.

The announcement this week of the creation of a new council to oversee and encourage reforms in Ukraine was a step welcomed by the IMF. Deputy Prime Minister Viktor Pinzenik, who spends a lot of his time working with the fund and other global financial institutions, will chair the council which will oversee smaller committees dealing with specific problems with tax reforms, wage and pension arrears and government bureaucracy.

Ukraine's economy (as measured by the Gross Domestic Product) declined by over eight percent in 1996, with industrial production falling more than 10 percent. Private analysts with the ING Barings investment and banking group in London say, however, that the pace of decline is slowing and should turn around and achieve a growth rate of 1.7 percent by the end of 1997.

Still, the analysts said in year-end report on Ukraine, that the country's authorities are "still more comfortable with central planning than with the market mechanism."

The need for action soon by the parliament is underscored by the fact that Ukraine has about $1 billion in debt payments coming due in 1997, principally to Russia and Turkmenistan for energy bills.

Analysts at ING Barings say they expect Kyiv to enter the Eurobond market this year, although they emphasize that the country must have an IMF program in place if it hopes to have success on the international capital markets.