Finance Ministry seeks to reduce Ukraine's dependence on external creditors

Finance Minister Serhiy Marchenko says the ministry would like to reduce dependence on external credit resources.

"We would like to have more long-term investment instruments in order to be less dependent on external loans. Because now we, the Ministry of Finance, are very dependent on external credit resources. These are, first of all, the IMF credit resources, then – macrofinancial credit support, and then the World Bank," Marchenko said.

Speaking at an online conference minister noted that all other private institutional investors are watching if Ukraine maintains cooperation with the IMF. According to Marchenko, an active IMF program means lower interest rates and more opportunities for borrowing from private investors.

"Of course, in a situation where we have to introduce changes to anti-corruption legislation, and this no longer depends on the Ministry of Finance but on parliament and other bodies and institutions, we would not like to be dependent on external sources of borrowing in this way. But we have what we have, and in this situation we are forced to consider different options and combinations," the head of the Ministry of Finance.

As noted by Marchenko, in terms of debt and borrowing, there are limitations to opportunities, first of all, due to the tough regulation on the market. The minister stressed that the demand for domestic bonds is insignificant despite the fact that interest rates are quite high.

"For example, on three-month bonds at a rate of 6% and inflation of 2.4%, we borrow at 10%. We consider this unfair on the one hand, but realizing that this is market, we're ready to accept it," Marchenko said.

Read alsoIMF criticizes Ukraine's tax policyHe added that the Ministry of Finance would like to be an active participant in the secondary borrowing market.

"We would like the domestic borrowing market to be more developed, we are talking about creating a secondary market... There is a wish for the secondary market to be active, and we could attract investors from other countries, and depositors could invest in our bonds. At the same time, the Ministry of Finance would like to be an active participant in this market in order to compensate for the risks," Marchenko said.

Ukraine and IMF: Background

• On June 9, 2020, the IMF's Executive Board adopted an 18-month Stand-By Arrangement (SBA) for Ukraine with funding equivalent to SDR 3.6 billion (about US$5 billion) aimed at helping Ukraine overcome the consequences of the COVID-19 pandemic.
• On June 12, Ukraine received the first tranche of the IMF loan under the SBA worth $2.1 billion. The Ministry of Finance planned to receive the second tranche under the same arrangement before year-end.
• On November 17, President Volodymyr Zelensky spoke over the phone with IMF Managing Director Kristalina Georgieva, saying Ukraine had fulfilled all the "structural benchmarks" for the IMF to review the existing Stand-By Arrangement.
• On November 23, Tymofiy Mylovanov, the country's ex-economy minister who had been recently appointed an advisor to the President's Office chief Andriy Yermak, said Ukraine would not receive another tranche from the IMF before the end of 2020.
• On November 27, Marchenko said the IMF was not considering the allocation of emergency financial assistance to Ukraine.