Ukraine Approves Anti-Crisis Bills

ReutersPrime Minister Yulia Tymoshenko attending a parliamentary debate on anti-crisis measures in Kiev on Wednesday.
KIEV -- Ukraine's parliament gave initial approval on Wednesday to legislation needed to secure billions of dollars in aid from the IMF after the central bank said that failing to act could result in a default and rising inflation.

The abbreviated compromise package of measures won the backing of 248 members on the first reading in the 450-seat chamber, which sat, for the first time in a week, free of protests over an early election.

The second and final reading was scheduled for Thursday.

As deputies debated moves to limit the effects of the world financial crisis, the hryvnia plunged to a record low.

Central bank chairman Volodymyr Stelmakh warned that failure to secure the $16.5 billion in credits would lead to "spiraling inflation, double-digit inflation -- very high. As well as moral discredit and declaring default."

The International Monetary Fund and Ukraine last weekend reached a preliminary agreement on the credits, seen as vital to stabilize Ukraine's financial and banking system and shield the country from the effects of the worldwide crisis.

Parliamentary Speaker Arseniy Yatsenyuk told deputies as debate got under way that extending the loan "depends on the actions of Ukraine's parliament. If we vote today, they examine it today. If we vote tomorrow, they examine it tomorrow."

The parliament had been deadlocked over President Viktor Yushchenko's dissolution of the chamber and call for a snap election in December.

Prime Minister Yulia Tymoshenko, the president's estranged ally, has denounced as "criminal" the notion of an election amid the world financial crisis. Her supporters had blocked debate to guard against any attempt to finance the election.

Tymoshenko urged deputies to back the compromise package, intended to meet what are believed to be IMF demands.

The fund has not made public the details of any conditions.

But IMF mission chief Ceyla Pazarbasioglu told reporters that she was "very impressed" with plans to recapitalize banks and pursue a "very strong monetary and exchange rate policy, prudent fiscal policies."

"We think there is vision and foresight in terms of looking forward and understanding the challenges that the country may face and taking action to address those challenges," she said.

She said the loan would come in tranches.

On the currency market, the hryvnia tumbled to 7.05/7.20 to the dollar despite new intervention, with the central bank offering to sell dollars at 5.7 against 5.5 on Tuesday.

But central bank chief Stelmakh said that, subject to final agreement with the IMF, the hryvnia would be "no weaker" than 6 to the dollar by year-end.

He said Ukraine's foreign debt situation was complicated by possible demands for early repayment of corporate loans in connection with recent downgrades of Ukrainian borrowers.

Also Wednesday, the parliament rejected a request from Yushchenko to release funds to pay for the early parliamentary election. A bill to make available $76 million for the election was supported by 222 lawmakers, short of the 226 it needed to pass.