Ukraine has been among the countries hardest hit by global financial turmoil as a plunge in the price of steel, its main export, exacerbates a credit crunch and a fall in stock prices. The IMF has pledged a massive loan.
The country will receive an initial injection of 3.5 billion euros
The International Monetary Fund has approved a 12.8 billion-euro ($16.4-billion) loan for Ukraine to stabilize the nation's economy, which is being pummeled by falling export values, rising inflation and the effects of the global financial meltdown.
IMF deputy managing director and acting chairman Murilo Portugal said in a statement Wednesday that the Ukrainian economy, especially the banking system, is experiencing considerable stress.
“Falling prices for Ukraine's major export, steel, have led to a substantial deterioration in Ukraine's current account outlook,” he added.
The banking sector has been hit hard due to its increased exposure to foreign loans since the Orange Revolution protests of 2004 brought to power a pro-Western leadership and economic reformers pressed for more European integration.
Some banks have reportedly frozen customers' accounts while untold numbers of Ukrainians have rushed to withdraw their cash, fearing the worst as job losses spread.
Ukrainian President Viktor Yushchenko has been pushing his country towards the West
The two-year agreement with IMF allows the eastern European country to receive 3.5 billion euros immediately in exchange for agreeing to a series of financial reforms.
Late last week, Ukraine's parliament approved legislation clearing the way for the IMF loan and establishing a stabilization fund to help ailing banks and companies unable to service their foreign debts due to the worldwide financial crisis.
Guarantees for bank deposits will be increased so as to bolster confidence in the banking system, and the government will be able to take a stake in lenders if necessary. In addition, Ukraine's budget will be tightened and spending cut.