Ukraine's leading English-language newspaper since 1995

Nikopol's Ferroalloy Plant may have to shut down on Nov. 1 due to slumping export prices. The International Monetary Fund won agreement Monday from the speaker of Ukraine's parliament to enact potentially unpopular conditions for a crucial $16.5 billion loan, as it grew clearer the IMF may have to help other emerging markets in Europe in the grip of the global financial crisis.

The IMF, which is also talking to Hungary and Belarus, is requiring that Ukraine adopt strict and likely unpopular measures in what could become a new dose of austerity for emerging economies in a region that had shown strong growth in recent years but now are suffering as investors and money flee.

Under the IMF's expected proposals, the fund will provide regular disbursements of dollars to Ukraine in return for tough domestic measures such as lowering inflation, reducing budget deficits and government spending.

The hope is that the availability of instant dollars will help Ukraine save its banking systems, support its faltering currency and avoid defaulting on its debt. The IMF hasn't made the conditions public, but provisions in draft legislation indicate they might include reducing government wages and pensions and subsidies for household utilities, as well as increasing taxes on gasoline, alcohol, tobacco and car imports, say experts.

It won't be an easy ride in Ukraine's crisis-hit parliament though. Prime Minister Yulia Tymoshenko is fighting an order by President Viktor Yushchenko to hold

early parliamentary elections in December. Each main parliamentary faction has put forward its own anti-crisis laws, some of which coincide with the IMF requirements and speaker Arseniy Yatsenyuk said he will try to work out a single package that all can agree on.

"Parliament will meet until the moment when the necessary package of economic legislation has been passed," Yatsenyuk told reporters Monday. "We have no choice. It is not a political issue, it is an issue of the country's vital activity."

Analysts say Ukraine is in for a painful economic downturn. Output in the steel industry, which accounts for 6 percent of the GDP and 40 percent of the country's exports, is down by 30 percent. Meanwhile the hryvna currency plunged to a historic low of 6.01 to the dollar last week as a run on banks stripped the banking sector of $3.4 billion.

Hungary has also faced currency difficulties, which also prompted its government to approach the IMF for emergency loans.

Though details of the Hungarian package will not emerge for a few days, the IMF said the European Union, individual governments and other institutions will be involved. On Oct. 16, the European Central Bank said it was ready to lend Hungary up to 5 billion euros ($6.2 billion) to support liquidity on its foreign exchange market.

The IMF said a "broad agreement" for a "substantial financing package" has been agreed with the Hungarian authorities.

The Hungarian and Ukrainian deal is unlikely to be the last. Belarus is expected to meet with an IMF delegation this week. The IMF has already agreed to loan Iceland $2.1 billion.

"The inescapable bottom line is that the IMF's work in emerging Europe has only just begun," said Neil Shearing, emerging Europe economist at Capital Economics.

Shearing says those countries with larger needs for foreign-currency financing than both Hungary and Uktraine may also have to go to the IMF for emergency assistance. He cites Turkey, which needs nearly $190 billion in foreign financing in 2008, as a likely candidate.

"A recent visit to Istanbul has convinced us that Turkey is much closer to calling on the Fund for financial assistance than many in the markets believe," said Shearing.

Shearing says other countries touted as possible IMF recipients include Romania, Estonia, Latvia and Bulgaria, especially if they continue to use up their foreign exchange reserves paying for imports, supporting their currencies and rolling over debts.

Neil Mellor, currency strategist at Bank of New York Mellon, thinks the Baltic countries and Bulgaria are particularly exposed to the turmoil in the global financial markets.

He said Latvia, Estonia and Lithuania have heavy foreign currency needs for things like funding trade deficits and debt repayments of 60 percent, 52 percent and 35 percent of gross domestic product, a factor that can weigh heavily on a country's currency. Bulgaria needs 55 percent of economic output.

"Moreover, these countries also have large gross external liabilities (short and long term debt), led by Latvia with 120 opercent of GDP, and followed by Estonia with 100 percent and Bulgaria with 97 percent," said Mellor.

Though the IMF only has around $200 billion to distribute, it is thought that Western governments may supplement the available pool. There was even speculation last week that the IMF was planning a $1 trillion injection into emerging markets to stave off defaults.

Analysts said the Ukraine and Hungary announcements suggest there's little or no chance that the IMF will sponsor a more lenient comprehensive approach to help countries seriously affected by the global financial crisis.

"This illustrates how the IMF isn't stepping away from its conditionality approach and therefore leave us rather doubtful about an IMF-led effort for emerging markets this week," said BNP Paribas currency strategist Elisabeth Gruie.