Jaresko tells Ukrainians country could impose debt repayment moratorium
The Ukrainian government is seeking opportunities to reach a deal to cut the country’s debt burden and boost economic growth, but could place a moratorium on foreign debt payments until acceptable restructuring conditions are agreed with creditors, Ukrainian Finance Minister Natalia Jaresko has said in an address to Ukrainian citizens posted on her ministry's Web site.
The minister said that the policy of the Ukrainian government was supported by the International Monetary Fund and the G7 countries, which have agree that commercial external creditors should participate in the rescue and recovery of the Ukrainian economy.
"The goal of the government is to protect the Ukrainian people, and we are ready to take any step to ensure that the interests of Ukraine are fully defended," the minister’s statement reads.
Jaresko added that the next tranche of IMF funding would be provided after the completion of the first review of the program, hopefully in the coming weeks.
"After the completion of the first review of the IMF program, which we hope will be completed in the coming weeks, Ukraine will receive the next tranche of IMF financing," the statement reads.
Jaresko said that the Ukrainian government is committed to the implementation of policies which will restore stability to government finances and bring much needed growth and jobs to the Ukrainian economy. These policies have been developed with the full support of the IMF and other international partners, she said.
While the corrupt legacy of the previous regime, coupled with the crippling effects of Russian aggression toward Ukraine mean that the path for Ukraine is not an easy one, the government is committed to ensuring a more prosperous and secure future for the Ukrainian people, Jaresko said in the statement.
The minister also noted that the burden of the current economic and financial situation in Ukraine cannot be shouldered solely by the Ukraine people, who have already paid a very heavy price.
The minister also said that in the IMF's Extended Fund Facility (EFF) program includes an agreement between the IMF and Ukraine that financial stabilization effort must be shared by three groups: 1) the IMF ($17.5 billion in fresh financing), (2) official lenders ($7.2 billion in fresh financing) and (3) international creditors ($15.3 billion via debt restructuring).
The first two groups have already contributed, as noted in the statement, with the IMF providing the first tranche of its committed funding earlier this year, and the fund is expected to provide the second tranche after the revision of the program. A number of international partners, including the United States, the EU, Japan and Canada have signed several financing agreements with Ukraine.
"Ukraine’s international sovereign creditors, represented by the Ad Hoc Committee, is the only one of the three groups that has so far refused to contribute to Ukraine’s recovery. For three months, despite the urgency of our situation, they have refused to engage in substantive negotiations on the terms of a debt operation meeting the three targets established in the IMF program. They have instead proposed that we use our foreign exchange reserves to repay external debt in order to avoid absorbing any financial losses in the current situation" the statement reads.
As UNIAN reported earlier, a meeting in a trilateral format with the participation of a Ukrainian delegation, the International Monetary Fund and the creditors committee will be held in Washington on June 30. The result of the meeting will be the development of the parties' positions regarding the restructuring terms.
Analysts at Goldman Sachs Group believe that Ukraine is facing a serious liquidity crisis, and probably will not be able to carry out the scheduled July coupon payments on its bonds, and therefore the government will not reach an agreement with creditors and will soon announce a moratorium on coupon payments maturing on July 24.
Ukraine started restructuring talks on March 13 immediately after the approval of the program with the IMF in amount of $17.5 billion. It seeks the extension of maturities and partial write-off of coupon and the nominal value of the debt in 2015 to save $5.2 billion on payments under debt securities, and up to $15.3 billion in the next four years.
During the negotiations the creditors' committee communicating through the media or intermediaries addressed the International Monetary Fund and Ukrainian Finance Ministry with a proposal to extend maturity and lower coupon payments, but refused to write off any of the principal debt.