The International Monetary Fund is prepared to ease the fiscal conditions attached to its programmes with European Union members Latvia, Hungary and Romania due to worsening economic downturns, a senior Fund official said on Saturday. Anne-Marie Gulde-Wolf, senior advisor in the IMF's European Department, told Reuters in an interview it was possible that non-EU member Ukraine could be given additional funds on top of its current $16.4 billion loan after an official said Kiev may seek funds.
She also said media reports that, in the IMF's review of Hungary's $25.1 billion programme, the Fund would let Budapest raise its fiscal gap target to 3.9 percent of GDP were "in the ballpark", and that there would be no change to Latvia's policy of keeping its lat currency pegged to the euro.
First quarter growth figures this week showed the economic crisis that has battered the EU's eastern members threatens to drive their contractions in national output well past levels forecast by the IMF. The IMF sees Latvia's economy contracting 12 percent this year but first quarter data showed a contraction of 18 percent.
Riga has asked for the ability to push its fiscal deficit to 7 percent of gross domestic product, rather than the 5 percent agreed to in the framework it agreed with the Fund and Gulde-Wolf said there would be an adjustment. "There is a much steeper decline than has been in the programme. The fiscal deficit is much larger, so we are looking at a revision to the programme," Gulde-Wolf, the fund's most senior representative at an annual meeting of the region's development bank EBRD, said.
The Fund is also due to finish a review mission to Hungary next week. Hungarian media have reported Budapest has asked to be allowed to raise its fiscal deficit target 3.9 percent of GDP, from 2.9 percent agreed with the Fund. Gulde-Wolf said that looked realistic, although the negotiations had not yet been finalised. "I don't want to comment on the exact number, but the ballpark figure is right," she said.
"The same story as in Latvia, we are looking at a weaker economic outlook and are adjusting the macroeconomic framework to that outlook, so some adjustment in the fiscal is warranted." On Romania, which saw its economy drop by a much worse than expected 6.4 percent from January to March, she said the process of review was the same: "If the global environment changed rather than policy changed, then we really need to look at reassigning the programmes."
UKRAINE NEEDS On Friday, Ukrainian deputy Prime Minister Hryhory Nemyria said Kiev needed more funds on top of its existing $16.4 billion IMF-led loan, the first time one of the government's leaders has said the country would have to ask for more cash. "It is, in general, possible," Gulde-Wolf said, adding that there were limits to how much Ukraine could borrow.
"It's difficult to assess without having those discussions with the authorities ... I cannot say anything specific." She said the IMF did not see a change in the strategy agreed with Latvia letting it keep its currency fixed to the euro, an approach some economists have said has crippled the country's competitiveness but has prevented the risk of mass default on loans in foreign currencies.
She also said the IMF was keeping a close eye on the region and was ready to help any other country with financing needs. "We are well aware of what's going on," she said. "But at this stage, we do not have specific requests from any countries."
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