IMF funds Ukrainian economy, Naftogaz

WASHINGTON, July 29 (UPI) -- The International Monetary Fund approved the release of the third installment of emergency funds to help Ukraine finance debt for its energy utility Naftogaz.

The executive board of the IMF approved the immediate release of more than $3 billion in response to a financial crisis in Ukraine, hit particularly hard by the global economic recession.

John Lipsky, acting chairman on the IMF board, said the Ukrainian economy had shown signs of improvement, though further corrective fiscal measures were needed.

"To cushion the impact of the sharper economic contraction and to reflect the imbalances of the state gas company Naftogaz, the revised economic program targets a broadened fiscal deficit," he said. "Corrective fiscal measures and structural reforms are a priority to ensure fiscal sustainability and to avoid crowding out of private sector borrowing."

Additional IMF considerations would go to strengthen the financial situation and transparency of Naftogaz.

The IMF, the European Union and other parties have looked for ways to support the Ukrainian economy in an effort to prevent a regional gas crisis.

A January row between Kiev and Moscow over gas debts and contracts prompted Russian energy giant Gazprom to cut supplies to Ukraine, leaving gas pipelines to Europe empty for weeks.

Ukraine has struggled with its monthly gas payments nearly every month since January, putting Europe on edge.

The IMF loan comes amid gloomy forecasts for the Ukrainian economy and calls for reform of the national banking legislation.