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. Last Updated: 07/27/2016

IMF Says Kiev Was Deceptive on Reserve Size

WASHINGTON -- The International Monetary Fund and the U.S. Treasury Department are considering new controls on future loans to Ukraine after the fund said it was misled by the government in Kiev over the size of its foreign currency reserves.

The IMF said Tuesday night that Ukraine's central bank engaged in a number of transactions worth almost $1 billion to generate a falsely optimistic picture of its reserves between 1996 and 1998.

The statement said "some of these transactions may have caused reserves to appear to be higher than they actually were."

Relying on the information provided, the Washington-based IMF said it approved three loans to Ukraine in late 1997 and early 1998 that it would have decided against "if the true state of Ukraine's reserves had been known at the time."

The IMF said it was still awaiting the results of a PricewaterhouseCoopers audit of the central bank reserves at that time. The audit will be made public.

In the meantime, the IMF said, any future disbursements of aid would be administered by the fund itself and would not be directly deposited in Ukraine.

A senior Treasury official, speaking on condition of anonymity, expressed concern about the information. Washington will closely review the audit to determine what additional safeguards are required "to ensure that future IMF resources made available to the Ukraine are used for their intended purposes," the official said.

The results of the IMF investigation come as U.S. lawmakers and other critics of the IMF have been calling for major reforms at the Fund. A U.S. congressional commission called last week for the IMF to focus on short-term financial crises and cease long-term lending.

Ukraine's misreporting of foreign currency reserves recalls tactics used by Russia's Central Bank in the late 1990s that the IMF also investigated. Congressional critics said the IMF mismanaged Russia's multibillion-dollar aid package.