The head of the International Monetary Fund's mission to Ukraine said the government was on track to earn the next part of its $16.4 billion bailout loan. But she warned it still faces tough decisions in next year's budget and admonished the country's warring politicians not to scapegoat its central bank.
The IMF agreed to the two-year standby arrangement with Ukraine last month to prevent a wave of corporate and bank defaults, after the global financial crisis crippled its export sector and choked off vital capital.
A "hard landing" ensued: Industrial output was down nearly 29% year-to-year in November, Reuters reported Thursday. The economic troubles have been compounded by political battles. Ukraine's parliament elected a new speaker this week, but rival leaders are still haggling over forming a new ruling coalition.
Russian gas monopoly OAO Gazprom also is threatening to cut off gas supplies if Ukraine fails to clear debts of over $2 billion for gas delivered this year.
In return for the first IMF loan of $4.5 billion, Ukraine's government had to scrap increases it pledged in public spending. Parliament approved additional spending cuts Thursday.
"It's understandable that there will be 'two steps forward, one step backward,'" said the IMF official, Ceyla Pazarbasioglu, at the end of a 10-day visit. "But I think . . . they now have the policies and the instruments." She said the country had successfully absorbed a traumatic currency devaluation.
The currency, the hryvnia, has lost 60% of its value since May, but has settled recently. The collapse has been controversial: The party of Prime Minister Yulia Tymoshenko tabled a motion for Friday calling the central bank to account for its recent actions, and possibly to dismiss chairman Volodymyr Stelmakh.