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Ukraine: IMF To Recommend $2.2 Billion Bailout Loan

Kyiv, 31 July 1998 (RFE/RL) - The International Monetary Fund (IMF) today announced that it will recommend a new $2.2 billion loan for Ukraine to help bolster the country's dwindling hard currency reserves. Mohammad Shadman-Palavi, the assistant director of the IMF department responsible for Ukraine, said Kyiv and the IMF have reached a "tentative" agreement on the bailout loan. He said President Leonid Kuchma is expected to sign a decree in the next few days ordering a cut in the budget deficit, a key condition on the IMF's long list of required reforms.

Parliament last week decided not to vote on a presidential decree that would have reduced the budget deficit this year from 3.6 to 2.5 percent of Gross Domestic Product (GDP). Because of the legislature's inaction on the issue, a follow-up decree by Kuchma will bring the required budget revision into effect.

The IMF also wants Ukraine to eliminate exemptions for its value-added tax. The government is considering new excise taxes on alcohol and cigarette production.

In other IMF news, Stanley Fischer, IMF first deputy managing director is in Moscow today to hear how Russia is implementing economic reforms demanded by international lenders in exchange for a large loan package.

Fischer is expected to meet later today with Russian leaders, including Prime Minister Sergei Kiriyenko and Russia's chief negotiator with international financial institutions, Anatoly Chubais. The IMF, which led the bailout package, has already released its first $4.8 billion rescue loan.

President Boris Yeltsin met earlier today with Chubais and praised him for securing the loans. The two men also discussed how the government was implementing the agreements with lenders and the situation on world financial markets.