1. UKRAINE PARLIAMENT APPROVES IMF PACKAGE
By Roman Olearchyk in Kiev, Financial Times, London, UK, Fri, Oct 31 2008
KIEV - Ukraine's parliament late on Friday adopted a package of legislation intended to secure a $16.5bn (euro12.6bn, pound10bn) standby loan from the
International Monetary Fund. Ukrainian officials said the IMF loan and related "anti-crisis legislation" is key to preventing a financial meltdown, foremost by shoring up confidence in the country's shaky banking sector.
"Our main task now is to overcome the first stage of the financial crisis," Arseniy Yatsenyuk, chairman of Ukraine's parliament said after the vote. "I think the government now has all the instruments needed [for this.]. I will now await the next package of legislation which relates to overcoming the effects of the economic crisis," Mr Yatsenyuk added.
It was not immediately clear if the legislation adopted met all IMF requirements. The IMF said it would swiftly move to formally approve the loan for Ukraine after the Ukrainian side approved legislation aimed at stabilising its bank system. The conditions were also expected to include unpopular requirements, including a freeze on social expenditures.
Passage of the laws comes nearly one week after Ukraine's government and central bank announced a tentative agreement on the emergency loan. Distracted by the prospects of a possible snap election, lawmakers in Kiev's deeply divided parliament struggled this week to adopt the legislation.
Victor Yushchenko, Kiev's president, called early parliamentary elections this autumn after the collapse of his coalition with Yulia Tymoshenko, premier. Ms Tymoshenko opposes a snap vote, saying it will complicate the country's ability to deal with the global financial crisis and an economic slowdown.
Concern has mounted in recent days, as dozens of factories in Ukraine's export-oriented economy have announced plans to halt production and warned
of possible lay-offs.
Wary of the trouble ahead, lawmakers on Friday voted down legislation to fund the elections. The setback casts doubt on Mr Yushchenko's ability to hold a snap vote and oust Ms Tymoshenko. Both are expected to square off for the presidency in a campaign that kicks off in 2009.
Ukraine's economy has grown impressively in recent years due to strong demand for its main export, steel, strong investments and a credit boom that has been fuelled by heavy foreign borrowing, particularly by the country's banks. Rising consumption of imports and falling demand for steel have widened the country's current account deficit, in turn putting pressure on the country's currency, which lost some 20 per cent of its value in October.
Sources said the IMF has called upon Ukraine to control spiralling inflation, reduce its trade deficit and free up its currency from a US dollar peg.
Ukrainian officials have said the IMF loan is key to propping up confidence in the eyes of foreign lenders. Their hope is that lenders will agree to refinance tens of billions of dollars in private sector debt that matures in the next 12 months.
LINK: http://www.ft.com:80/cms/s/0/d0f93498-a782-11dd-865e-000077b07658.html
2. UKRAINE PARLIAMENT ADOPTS LAWS NEEDED FOR IMF LOAN
By Daryna Krasnolutska, Bloomberg, New York, New York, Friday, October 31, 2008
KIEV - Ukraine's parliament adopted a law that will allow the country to receive a $16.5 billion bailout from the International Monetary Fund aimed at helping the former Soviet republic ride out the global financial crisis.
The law was backed by 243 lawmakers in the 450-seat legislature in Kiev today. The Pro-Russian opposition party led by former Prime Minister Viktor Yanukovych and the communists abstained.
The government and President Viktor Yushchenko drew up the legislation to meet IMF requirements, asking lawmakers to approve it on Oct. 22. They had delayed final approval since then because of disputes over the agenda for the session and required amendments.
Ukraine, like Belarus, Hungary and Iceland, is seeking IMF funds to support the hryvnia and prevent banks from running out of cash as emerging market economies feel the pinch of the crisis. Central bank Governor Volodymyr Stelmakh said on Oct. 29 the country may default if it doesn't get the IMF aid.
The Washington-based IMF's executive board will consider Iceland's $2.1 billion loan at a meeting on Nov. 5 and Hungary's $25.5 billion deal at a Nov. 6 session. It didn't say when it would complete the lending package for Ukraine.
The assembly approved measures to recapitalize banks, increase guaranteed deposits to 150,000 hryvnias ($25,338) from 50,000 and set up a stabilization fund. All proceeds from the state assets sale and from the state's bonds sale this year and next year will be injected into the fund, according to the law. Money from the fund will be used for loans to banks and companies to help them to repay their debts to foreign investors.
The banks are also obliged to use their incomes to raise capitalization. The state will buy stakes in the troubled lenders, according to the law. The law will expire when ``the situation is stable but no later than Jan. 1, 2011.'' [To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net.
LINK: http://www.bloomberg.com:80/apps/news?pid=20601095&sid=aA0U6CM3EO8s
3. UKRAINE ORDERS BANKS TO SET EXCHANGE RATE NO HIGHER THAN UAH 6.3 /$1
Interfax-Ukraine, Kyiv, Ukraine, Friday, October 31, 2008
KYIV - The National Bank of Ukraine (NBU) has instructed the nation's commercial banks to set their exchange rate no higher than UAH 6.3 /$1.
The Central Bank made this request in a letter signed by NBU First Deputy Governor Anatoliy Shapovalov and sent to banks on Thursday,
"Given the level of the weighted-average U.S. dollar rate as a result of trading on the interbank currency exchange for October 30, 2008, we believe it advisable to set the dollar sell rate for the public on the cash market at no higher then UAH 6.30. Bank managers bear personal responsibility for fulfilling this requirement. The NBU will treat failure to comply as a violation by authorized banks of the rules and terms of foreign currency trading," the letter says.
In addition, the NBU is requiring bank managers to ensure the sale of the foreign currency purchased from the National Bank on October 30 at the rate it was purchased from the NBU, i.e. UAH 6.05 /$1.
The NBU sold over $500 million on the interbank market on Thursday, market insiders told Interfax.
President Viktor Yuschenko met with officials from the NBU and the commercial banks on Thursday to agree on joint actions to maintain the national currency at an exchange rate no higher than UAH6.3 /$1.
In the first half of the day on Thursday, the hryvnia slid to a record low against the dollar - more than UAH 7 - amid panic selling. In some regions of the country it was virtually impossible to buy hard currency.
Market analysts said the hryvnia's precipitous decline was the result of several factors: hesitation on the forex market on the part of the NBU, a run on Prominvestbank and lack of clarity concerning the allocation of funds from the IMF bailout (parliament has only approved the bill necessary to receive the funds in a first reading).
The NBU's intervention stabilized the hryvnia at 6-6.6/$1 by midday, down from 6.65-7.2/$1.