"The support by the fund will promote an accelerated cooperation between Ukraine and other international financial organizations, ... strengthen the confidence of private investors and ensure stable operations of the banking system of Ukraine," the institutions said in a joint statement.
If approved, the loan would be a crucial lifeline for the former Soviet republic, which is struggling to keep its financial system afloat amid the global economic crisis.
A sharp decline in world prices for steel, Ukraine's main export, and a steep drop in the value of its currency, the hryvna, have left many analysts speculating that the country faces dire economic straits.
It comes on top of continuing political turmoil, with the country's leading politicians feuding ahead of new parliamentary elections scheduled for December.
The world financial crisis has put heavy pressure on European currencies in recent days, with the British pound and the euro sagging on worries over Europe's exposure to emerging markets — particularly its crisis-stricken eastern neighbors.
Sunday's IMF announcement came just two days after the Ukraine's National Bank announced that it would allow the official exchange rate for the hryvna to move closer to the market's exchange rate, fulfilling a key IMF condition.
The hryvna has lost more than 20% in the financial crisis that has hit Ukraine hard. The currency fell to its historic low Thursday, trading at 6.01 per $1 on the foreign currency exchange. The fall was due to a shortage of foreign currency because of a 40% decline in exports and a run on banks that stripped the banking sector of $3.4 billion this month.
The IMF loan is expected to help stabilize the financial sector, but the deepening political crisis threatened to block the deal.
Allies of Prime Minister Yulia Tymoshenko broke parliament's electronic voting system Friday as they protested President Viktor Yushchenko's order to hold early elections.
Tymoshenko and Yushchenko were allies during the tumultuous 2004 Orange Revolution mass protests that propelled Yushchenko to the presidency. But the two have turned into fierce rivals ahead of the scheduled 2010 presidential election.
Yushchenko ordered a new parliamentary vote in December, but Tymoshenko is fighting to avoid the vote and retain her job.