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Ukraine May Seek Third IMF Lending Program in 2013, Dragon Says

Ukraine will probably wait to start talks with the International Monetary Fund on a new bailout loan until next year, investment bank Dragon Capital said.

Ukraine needs to refinance foreign-currency debt redemptions of about $7.7 billion, including $5.5 billion to the Washington-based lender, Olena Bilan, chief economist at Dragon Capital in Kiev, said today in an e-mailed note.

“As the political landscape after October parliamentary elections should be more conducive to meeting IMF demands, we expect the authorities to negotiate a new lending program with the fund in early 2013,” she said in the note.

The IMF approved a $15.6 billion loan to Ukraine in July 2010, the second in two years, after the country’s economy plunged almost 15 percent in 2009. The loan, frozen last March after the government failed to raise natural gas price for households ahead of the general elections, ends this year.

Ukraine’s gross domestic product will probably grow 2.2 percent this year and 3.5 percent in 2013, compared with 5.2 percent in 2011, Bilan said. The current-account deficit may narrow to 5.5 percent of GDP next year, compared with 6 percent expected for 2012, according to the note.

“Despite a lower fiscal gap, rising foreign-currency debt repayments will keep government funding needs high at an estimated $12.4 billion, or 6.3 percent of GDP,” she wrote. The government will probably cut the budget deficit to 2 percent of GDP in 2013 from 3 percent this year, according to Bilan.

The hryvnia will remain stable near 8 per dollar for the rest on 2012 and 2013 “in our base case scenario,” Bilan said. Should there be an “adverse global demand shock,” the central bank may allow the currency to weaken to as low as 10 per dollar, she added.

-- Editors: Alan Crosby, Balazs Penz

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