Ukraine could stop repaying sovereign debts to its lenders within weeks, if no deal is struck soon, said US-born Finance Minister Natalie Jaresko, as Kiev struggles to restructure its debt of over $50 billion.
“I can’t wait until
the end of the summer and do nothing… I don’t think we have that
much time … I would have to use other tools to reduce the
pressure on the balance of payments, [including – Ed.] a
moratorium,” Jaresko told reporters Wednesday in
Ukraine has declined a
debt restructuring offer, suggested in May by a group of
investors representing about $9 billion of Ukrainian bonds,
including Ukraine’s biggest lender Franklin Templeton.
The plan suggested
reducing $15.8 billion of Ukrainian debt in the next four years,
which is more than the $15.3 billion targeted by Kiev.
The proposal would require the withdrawal of $8 billion from the
central bank’s foreign exchange reserves, which is illegal by
Ukrainian law, said Jaresko.
Creditors must make
concessions as the debts are the result of businesses made with
the previous ‘dictatorship’ government, Jaresko said, as
creditors refuse to write off Ukraine’s debt.
Kiev will be given $17.5 billion as a bailout from the IMF if it
manages to save $15.3 billion over 4 years, to keep the
debt-to-gross domestic product ratio below 71 percent by 2020,
and make sure that the government’s financing costs in the future
would not exceed 10 percent of GDP.
IMF is now reassessing Ukraine’s progress on reforms.
The lender has repeatedly said the bailout deal greatly depends
on the progress on debt restructuring, but recently softened its
IMF is ready to pay its next tranche of the bailout to Kiev even
if there is no final deal on the debt discussions, said David
Lipton, Deputy Managing Director of the IMF Tuesday. Compared to fierce discussion on
the Greek bailout deal, Ukraine has shown
progress, he added.
Ukraine has agreed to
increase the cost of gas to consumer by 280 percent, and 66
percent for heating, in an effort to get extra financial aid from
In May, Ukraine’s President Petro Poroshenko signed a bill granting the government the
authority to suspend foreign debt payments. The bill’s target is
to shield state assets in case of an ‘attack’ from ‘dishonest’
The total debt of Ukraine is about $50 billion and will reach 93
percent of GDP, according to the National Bank of Ukraine, up
from 71 percent of GDP in 2014.
Russia, one of Ukraine’s biggest lenders, has no interest in
making concessions on Kiev’s loan repayments and expects it to
repay $3 billion by the end of 2015 for maturing 2013 Eurobonds.
With one of the lowest average salaries in Europe, at about $160
a month, Ukraine is facing inflation of 34.5 percent in 2015.