IMF European financial aid hailed
http://news.bbc.co.uk/go/rss/-/1/hi/business/7692943.stm Version 0 of 1. A bank which provides investment to Eastern Europe has welcomed a decision by the International Monetary Fund (IMF) to help Ukraine and Hungary. The IMF is to offer a $16.5bn (£10.4bn) loan to Ukraine and has agreed an as yet undisclosed package with Hungary. "I think that is a very helpful role of the IMF," Erik Berglof at the European Bank for Reconstruction and Development (EBRD) told BBC News. Hungary's currency has gone up slightly on Monday against the euro. The forint has seen a sharp fall, stocks have tumbled and the country has cut its growth forecast for 2009. "The programme which has now been agreed with the IMF provides a strong basis for confidence in the country's [Hungary's] financial framework," the EBRD said in a statement. Political situation Ukraine and Hungary are trapped in the vice of the last phase of deleveraging, or the reduction in credit being provided by banks and other investors, and the decline in the real economy Robert PestonBBC Business Editor <a class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/10/goldman_hungary_and_regulators.html">Read Robert's blog</a> Ukraine is to receive the loan to help it "maintain confidence and economic and financial stability", the IMF said. The country has seen its stocks, banks and currency badly shaken by the global credit crunch. Mr Berglof, who is the chief economist at the EBRD, said Ukraine's political problems had made the country's financial situation worse. "Here the IMF package can really help provide stability both to the economic situation but also to the political situation," he said. "It has been for a long time split between the presidency and the rest of the government and that situation has, I think, hurt the economic situation and also introduced some concerns about the banking system." The IMF loan depends on the ex-Soviet state being able to balance its budget and make reforms to its banking sector. Other countries Meanwhile, Neil Shearing, Emerging Europe economist at Capital Economics, said that "the most vulnerable countries in the region have yet to be hit by the crisis". "Accordingly, it seems that the IMF's work has only just begun," he added. Last week, the IMF said it was to give Iceland a $2.1bn loan as its banking system came close to collapse. Pakistan and Belarus are also in talks about accessing IMF funding. The "substantial financing package" for Hungary is due to be finalised in the next few days, the IMF said. It is conditional upon Hungary adopting "strong policies" and will be drawn from the IMF, the EU, and some individual European governments "together with regional and other multilateral institutions", IMF Managing Director Dominique Strauss-Kahn said in a statement. "The policies Hungary envisages justify an exceptional level of access to fund resources," he added. The BBC's Sarah Morris in Washington says this suggests the loan is likely to be one of the biggest the IMF has ever made. |