Ukraine Finance Minister Viktor Pinzenyk handed in his portfolio on Thursday over a controversial government plan to control the budget deficit, a key International Monetary Fund (IMF) loan condition, dpa reported.
Pinzenyk in a statement to parliament said he "could not continue while abandoning priciples of a balanced budget, defict control, and avoiding living on credit."
A close ally of President Viktor Yushchenko, Pinzenyk criticised a national budget supported by Prime Minister Yulia Tymoshenko, Yushchenko's rival for control over the country's executive branch.
Yushchenko supports conventional macroeconomic remedies to a Ukraine's worsening economic slowdown, in part because the IMF has made the policies criteria for further emergency loans.
Critical in Yushchenko's programme for the economy is continued loans from the IMF and other western credit institutions, without which Ukraine could face a default, Yushchenko said Tuesday.
Tymoshenko among other measures supports deficit spending, massive government intervention in currency markets, and expansion of Ukraine's money supply - all policies violating the terms of a 4.5 billion dollar November IMF loan, and possible grounds for a end to further IMF funding to Ukraine.
Tymoshenko has suggested Russia might step in to provide Ukraine financing were IMF funds to be cut off, a proposal anathma to Yushchenko.
"In the present situation the professional position of the Finance Minister has become a political hostage," Pinzenyk said, explaining why he would not further support the Tymoshenko government's economic policies.
The current Ukrainian national budget, passed into law in December, projects 6 per cent growth along with expanding employment and falling inflation.
Pinzenyk refused to sign the document, going on extended medical leave as the Tymoshenko-led parliament drafted and passed the budget bill.
Pinzenyk's departure from the Tymoshenko government marked a worsening of the deadlock at the top levels of the government of Ukraine, where the world financial crisis has brought GDP shrinkage for the first time in a decade, along with double-digit spikes to inflation and unemployment.