Ukraine Hints At Calling Debt Moratorium This Summer
June 11, 2015
A top Ukrainian official has warned that she may invoke a moratorium on the country's debt payments before reaching an agreement with creditors to restructure debts.
Ukraine's parliament passed a law last month that would allow the government to impose a moratorium on foreign debt payments if necessary.
'I don't think we have that much time,' Ukrainian Finance Minister Natalie Jaresko told reporters in Washington, when asked if debt negotiations could last past the summer.
'In that respect, I'd have to use other tools to reduce the pressure on the balance of payments, a moratorium,' she said.
Jaresko and Ukrainian Prime Minister Arseniy Yatsenyuk are in Washington this week to meet with the International Monetary Fund (IMF), promote Ukraine as an investment destination, and ask U.S. officials for more economic and military support.
Jaresko said Ukraine cannot wait until September to reach an agreement with its creditors to find some $15.3 billion in savings, and likely would have to call a debt moratorium first.
She repeated that she expected the IMF to release its next $1.7 billion tranche of aid to Kyiv in July, even if there is no agreement on a debt restructuring by then.
Kyiv has been driven to the edge of default by economic mismanagement and a separatist conflict in the east.
It is trying to reach a restructuring agreement with bondholders as one of the conditions of the IMF's $40 billion bailout program.
But the two sides have failed so far to see eye-to-eye. A powerful creditors' committee refuse to offer a writedown on part of the debt that Kyiv is pressing for.
'If we're not able to make progress, then the creditors will be provoking the use of that [moratorium],' Jaresko said, adding that the government had already made some $2 billion in repayments to creditors since last year, despite fighting a conflict in the east.
She declined to say whether Kyiv would make its coupon payments to bondholders next week.
The creditors' committee has proposed drawing some $8 billion from Kyiv's central-bank reserves as part of the restructuring plan, which Jaresko has called 'unacceptable.'
She said such a plan undermined the very purpose of Kyiv's economic program with the IMF and other donors, which aims to bolster the level of central-bank reserves.
As part of the IMF's $17.5 billion loan program, Kyiv still must complete three reforms, including improving central-bank independence, before the IMF can release the next aid payment. Jaresko said she expected parliament to vote on the measures next week.
Meanwhile, Ukraine's prime minister met with U.S. Treasury Secretary Jack Lew to discuss a possible $1 billion in additional loan guarantees for the struggling country.
Lew assured Yatsenyuk Ukraine would receive U.S. support, and urged him to keep negotiating with creditors and carrying out reforms in the tax, energy, and agricultural sectors, as well as fighting corruption, Ukrainian officials said.
Yatsenyuk said he urged U.S. leaders to 'help make Ukraine a success story' as part of their campaign to punish Russia for its aggressions in eastern Urkaine.
'This matters. You are the leader of the free world,' he said in an interview on CNN. 'You have to defend and protect' countries like Ukraine that are struggling to be free.
'It is up to the free world to deter Russia and make Russia pay the price and adhere to international law,' he said.
'We passed through difficult, painful reforms [for the economy], but we want to make our country better,' he said, vowing that Ukraine will stick to the path of reform this time after years of falling by the wayside.
'This is the way to boost our economy and make our economy a success story,' he said. A bilateral U.S.-Ukraine investment conference is planned for July 13.
Yatsenyuk also met with Vice President Joe Biden, who noted that the United States and its G7 allies 'stand ready to impose significant additional sanctions if necessary' to respond to Russia's aggressions in Ukraine, the White House said.
IMF first deputy David Lipton said the IMF loan program for Ukraine was a kind of 'Marshall Plan' to lift the battered country back onto its feet.
But he said that all the plans for economic stabilization and growth could be undermined by the conflict in the east, and urged full implementation of the Minsk cease-fire agreements by all parties.
With reporting by Reuters, TASS, and CNN
Copyright (c) 2015. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.
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