Kiev  - Ukraine's government has met International Monetary Fund (IMF) demands by making politically-painful changes to monetary and fiscal law, a move opening the way for more emergency credits, a senior official said Wednesday.

Ukraine's cabinet in morning a morning session passed resolutions drastically limiting where future IMF loans to Ukraine might be spent, among other Fund pre-conditions for further loans, said Vice Minister Hryhory Nemyra, according to an Interfax news agency report.

The change obliged Ukraine's government to funnel any future IMF credits only into the country's banking sector, and banned government inference in currency exchange trading by the National Bank of Ukraine (NBU).

Refinancing rates allowed Ukrainian banks also will be tightened, Nemyra said.

The IMF in November issued Ukraine a 4.5 billion dollar tranche of a 16 billion dollar credit programme, but delayed paying out a second tranche scheduled in mid-February, citing the Ukrainian government's failure to meet IMF loan conditions.

Ukraine's government, led by populist Prime Minister Yulia Tymoshenko, faces a massive deficit and is struggling to find cash needed for food and energy subsidies popular with Tymoshenko's low- income electorate.

Tymoshenko has been outspoken in her criticism of the National Bank of Ukraine, whose managing board has allowed the value of the national currency the hryvna to fall by some 60 per cent since September, spiking food, housing, and energy prices.

She likewise has attacked higher bank refinancing rates supported by the NBU and the IMF, as likely to slow even further Ukraine's already depressed economy.

Led by Tymoshenko, Ukraine's government and parliament dragged its feet on implementing IMF conditions tied to the loan.

IMF leadership has insisted Ukraine implement tight monetary policies and only use the loan money to prop up its banking industry, as necessary to prevent a wholesale collapse of Ukraine's financial sector, and a spread of bank defaults to the rest of East Europe. (dpa)