Washington, 26 August 1998 (RFE/RL) -- While global investors continue to assess Russia's new government and its decision on the rescheduling of a large part of its government debt, international financial officials are also intensely watching neighboring Ukraine.
Ukraine, with Russia as its largest foreign trader, has been battling the effects of the falling ruble. Its own economy was in no great shape even before the Russia financial situation took a serious turn, but Kyiv officials had begun to put together the shape of a program for putting the country's economy on a positive course.
They had negotiated a major, extended term $2.2 billion loan with the International Monetary Fund (IMF) and had been working out two new World Bank loans that could total $ 600 million.
But with the continuing uncertainty in Russia, officials at both the IMF and the World Bank have decided to reassess the entire situation before going ahead.
A spokeswoman at the IMF said that "with recent developments in Russia, we are reviewing the situation in Ukraine."
It had taken more than a year for Ukraine to be able to work out a reform and stabilization program acceptable to the IMF, to be able to meet the tough criteria for its three year, EFF (Extended Fund Facility) loans. So when the agreement came, IMF officials said they planned to have the loan before the fund's board of Executive Directors by late August.
But that was before Russia's latest problems. As global investors fled from Russia's troubles -- not to mention the difficulties in Asia -- they began pulling out of Ukraine as well. But that is only one of the effects. Since Russia accounts for more than 40 percent of Ukraine's foreign trade, Russia goods suddenly became cheaper when purchased with Ukrainian hryvna.
The IMF spokeswoman would not provide any details on how the reassessment is being conducted or how long it will take. She would only say that "as soon as the reassessment is completed," the fund will set a date for the executive directors to vote on the Ukrainian loan.
At the World Bank, officials were taking the same decision, putting off a vote on the two loans to allow more time to assess the effect of Russia's financial turmoil.
World Bank officials have been saying they are concerned that the downward pressure on the hryvna, upward pressure on interest rates and the general turmoil will damage Kyiv's ability to push ahead with the structural reforms it must implement.
Traditionally, the World Bank waits for the IMF to approve its programs with a country before committing bank loans.
No officials at either institution are publicly talking about their concerns about Ukraine. But the actions indicate the real concern at both the IMF and the World Bank that the current financial turmoil is undercutting the ability of both Ukraine and Russia to effectively reform.