Ukraine's leading English-language newspaper since 1995

The International Monetary Fund asked Ukraine on Sunday to veto wage and pension increases that were approved by parliament last week before it decides whether to disburse further funds.

The IMF spent two weeks in Ukraine, one of Europe's poorest performing economies, to review Kiev's progress in implementing its conditions as part of a $16.4 billion bailout package and decide whether to release $3.8 billion by the end of the year. Parliament approved a bill that increased the minimum wage and pensions by over 20 percent by the end of next year -- a move that would strain the budget.

"The mission found that the economic and financial situation in Ukraine is stabilising as a result of policies under this program," the IMF said.

"Preserving these gains will require policy discipline and corrective actions in some areas."

It said it had agreed these measures with Ukrainian leaders but did not spell them about, besides noting the wage law veto.

"The mission is now awaiting endorsement of the agreed policy package... including assurances that the wage and pension law approved by Ukraine's parliament... which is at odds with the objectives of the authorities' program, will be vetoed," it said in a statement.

Prime Minister Yulia Tymoshenko has said the wage increases bill was like placing "an atom bomb under the finances of the country" and has called for the law's veto by President Viktor Yushchenko. The two however have been involved in a political struggle for over 18 months ahead of a presidential election on Jan. 17.