By Natalya Zinets
KIEV, Oct 16 (Reuters) - Ukraine's government and the International Monetary Fund were locked in talks on Thursday to agree on a package of remedies to to cushion Ukraine's economy from the world financial crisis.
Finance Minister Viktor Pynzenyk had met the IMF expert mission on Thursday and the two sides "discussed the situation concerning the world financial crises and the challenges facing UKraine's financial system."
The statement added both sides agreed to produce "recommendations for Ukraine vital for the operation of the banking sector and macroeconomic stability for Ukraine, based on the experts' assessment and taking account of the experience of other European countries".
The IMF delegation arrived on Wednesday, which has joined Iceland, Hungary and Serbia in approaching the Fund for help. A central bank official said on Wednesday discussions could focus on making a standby credit facility available to Ukraine.
Ukraine is long used to political upheaval since the 2004 "Orange" Revolution brought a pro-Western governing team to power and has avoided sharp blows from the financial crisis. But analysts have expressed concern about the weakness of the hryvnia currency and the stability of the banking sector.
Prime Minister Yulia Tymoshenko, addressing a cabinet meeting, pronounced the country's banking system sound.
"I have said clearly that the government, the central bank and all state institutions are acting in a correct, logical and consistent way," she told ministers. "There are no serious signs of the world financial crisis in Ukraine in any way now."
The IMF's Kiev office made no comment on the mission, expected to remain in Ukraine for at least a week. Estimates of what the IMF may give to Ukraine vary widely from $3-15 billion. Most analysts have refrained from citing any particular figure.
Financial worries are compounded by the latest bout of political turmoil, with President Viktor Yushchenko dissolving parliament and calling a December parliamentary election.
Tymoshenko, his estranged ally from the 2004 "orange" protests opposes the election and her allies have launched court action suspending preparations for the vote.
The head of the central bank's council, Petro Poroshenko, said the Fund's mission would "calm down investors".
"This does not mean that Ukraine urgently needs these funds," Poroshenko said late on Wednesday. "This is just an additional message to investors and depositors: the situation is under control."
The hryvnia hit an all time low to 5.9 per dollar last week, and was lifted thanks only to central bank interventions.
The central bank has a difficult balancing act -- letting the hryvnia weaken under the weight of the current account gap would take away one of the few constants in a country gripped by political turbulence since the 2004 "Orange Revolution".
Propping it up would deplete its reserves of $37.5 billion.
Figures released on Thursday showed the trade deficit for goods, which has pushed the current account deficit wider, soared to $12.489 billion in the first eight months of the year from $5.939 billion in the same period last year. (Writing by Ron Popeski; editing by Chris Pizzey)
The International Monetary Fund (IMF) is preparing a series of loans to both Hungary and Ukraine as financial problems are hitting the two countries. Hungary has already received a 5 billion credit line from the  (ECB). Ukraine is seeking a loan of up to 14 billion. 

Dominique Strauss-Kahn says the IMF is prepared to give loans to Hungary and Ukraine if needed.

The credit line to Hungary will be used to cover banks’ shortage of euros. Hungary has a severe debt problem with them posting an account deficit of €5.3 billion or 4.9% of GDP this year. As a result of this, Hungary is unable to find suitable credit to store up its supply of euros. 

"We are in close dialogue with the Hungarian authorities and the EU to discuss further responses to the current challenges, including possible technical and financial support by the IMF", said Dominique Strauss-Kahn, Managing Director of the IMF. "I have informed the authorities that the IMF stands ready to assist their efforts. We will provide technical assistance as needed and, in the context of a supportive policy setting, are ready to undertake decisions on possible financial assistance, responding rapidly."

Ukraine's Finance Minister  met with an IMF team on Thursday. In a statement, Pynzenyk said "the parties discussed a situation of influence the world financial crisis had on the economy of Ukraine." It is not yet known how much the IMF is expected to lend to Ukraine but it is expected to be between $3 billion to $14 billion. It is also not known what type of conditions might be placed on the loan. 

In addition to financial uncertainty, Ukraine is suffering from political turmoil with the current President, Viktor Yushchenko, calling a snap parliamentary election for December. The Prime Minister, ,  has made moves to stop the election. Ukraine's yearly trade deficit has increased by almost $7 billion since last year. 

The credit line by the European Central Bank is the first time publicly that it has extended help to countries other than the 15 that make up the . 

According to , Hungary might be able to start the process of joining the euro quicker then expected. Currently, Hungary is on track to join the euro in 2011 or 2012, but if sped up, it is possible it could join as early as 2010. This might protect Hungary from further financial problems.