The International Monetary Fund announced rescue plans for Ukraine and Hungary, as the G7 club of rich nations promised to cooperate in stabilizing global markets as stock prices plunged around the globe.
Member of the G7 said they will cooperate to stabilize markets
Ukraine will get a $16.5 billion (13.35 billion euros) loan from the International Monetary Fund. Hungary will also get "substantial" help, the specifics of which will be announced in the next few days, IMF director Dominique Strauss-Kahn confirmed Monday, Oct.27.
The IMF has offered up to $200 billion in loans to countries facing financial difficulties caused by the current global economic crisis. On Friday, the IMF made a $2.1 billion loan to Iceland.
The current climate of market instability has thrust the IMF into the spotlight. Some world leaders, including German Chancellor Angela Merkel, have called for the global body to become more involved in policing global financial markets. Merkel called for "better international coordination" and "a strengthening of the role played by the IMF in ensuring stability of the global financial system."
Rich nations promise cooperation
The IMF said money is on the way to Ukraine and Hungary
The G7 rich nations also promised to work together to stabilize global markets in a statement released Monday. The Group of Seven nations -- made up of Britain, Canada, France, Germany, Italy, Japan and the United States -- sought to calm the global financial panic by affirming their "shared interest in a strong and stable international financial system."
"We continue to monitor markets closely and cooperate as appropriate," the statement from G7 finance ministers and central bank chiefs said.
It was unclear whether that promise would be enough to bring stability to the markets. Japan's Nikkei stock index and most other markets in Asia posted major losses on Monday. Germany's DAX was also down 3.54 percent at the start of trading Monday and the British stock market slumped by more than 5 percent early on.
Ukraine facing political, financial turmoil
Ukraine began to run into problems when the global demand for steel, its main export, began to drop in recent weeks. Earlier this month, the former Soviet country stopped early withdrawals from savings accounts to stop a run on banks. Several of the county's banks also needed help after Ukraine's stock market lost more than 70 percent of its value.
Ukraine's leaders are more at odds than it might appear
The country has also begun using up foreign currency reserves to prop up its currency, the hryvnia, according to analysts. That has led to worries that the government will be unable to pay back some foreign loans that have been a driving force behind Ukraine's recent economic growth.
"The IMF is moving expeditiously to help Ukraine, and this program is focused on the essential upfront measures needed to maintain confidence and economic and financial stability," the IMF chief said in his statement.
Yet the country is still in the midst of a political crisis. President Viktor Yushchenko and Prime Minister Yulia Tymoshenko have been locked in a nasty fight over the president's decision to call for new elections.
The finance ministry in Kyiv welcomed the IMF's support, saying it "opened a door to Ukraine's speedy cooperation with other international financial organizations."
Hungary expected to set spending limits
The IMF, European governments and other partners are set to offer help to Hungary. While the IMF did not release the size of the rescue package, analysts said it should be over $10 billion.
Hungary is vulnerable due to a large budget deficit, overvalued currency, low stock of foreign reserve and high levels of short-term foreign currency debt, AFP news agency said. The country's national currency, the forint, has fallen sharply.
Last week, Hungary's central bank decided to raise its key interest rate by three points to 11.5 percent, the highest in the European Union.