UPDATE 1-Ukraine in talks with IMF on new standby deal: president's ally

KIEV, Sept 14 (Reuters) - Ukraine has started talks with the International Monetary Fund on a new standby agreement that would replace the current $17.5 billion assistance programme, the president's parliamentary representative Iryna Lutsenko told reporters on Friday.

Lutsenko did not say what the terms of the new agreement might be or when it would start.

A new standby agreement could give Ukraine some breathing space as it has struggled to fulfill some of the conditions of an existing deal and needs to service debt payments which will peak next year.

Lutsenko did not address whether the government would agree to raise gas prices, which is a key sticking point in the current deal.

"This means that the IMF appreciated the reforms, the pace, the results of the reforms that we made within the framework of that programme and are ready to provide us with another programme," she said on the sidelines of the Yalta European Strategy (YES) meeting in Kiev.

Separately, the central bank governor said Ukraine hoped to reach a deal on continued co-operation with the IMF next week, and that optimism around such an agreement had helped calm the foreign exchange market.