President: Ukraine can service its debt
Yushchenko gives an interview to the Associated Press
President Viktor Yushchenko said Wednesday that Ukraine has enough money to service its debt, downplaying increasingly pessimistic assessments of country`s ability to weather the financial storm engulfing eastern Europe, AP reported.
In an interview with the Associated Press, Yushchenko denied speculation about imminent government and corporate defaults, saying the Ukrainian government and companies have the means to pay up.
Yushchenko urged his rival Prime Minister Yulia Tymoshenko to trim spending to meet a key condition of an International Monetary Fund rescue agreement in order to continue receiving aid. The IMF froze a crucial second installment of its $16.4 billion emergency loan earlier this month, prompting international rating agencies to downgrade Ukraine.
"To talk about default based on objective factors would be politicking," Yushchenko said. "We are not discussing whether Ukraine has the resources to service its debt -- sovereign and corporate -- no doubt, these resources exist."
Standard and Poor`s on Wednesday slashed Ukraine`s long- and short-term foreign currency sovereign credit ratings to CCC+/C, seven notches below investment grade, from B/B, due to political instability and IMF credit risks with a negative outlook. The Ukrainian currency, the hryvna, meanwhile, has fallen 46 percent against the dollar since last fall; the hryvna closed at 9.0 to the dollar on the foreign currency exchange Wednesday, down from 4.9 last September.
Countries across Eastern Europe have seen their currencies drop in recent weeks as investors flee amid the world financial crisis.
Credit default swaps on Ukrainian bonds -- instruments to insure the bonds against nonpayment -- have soared to levels indicating the market anticipates default.
Ukraine has some $46 billion in external debt to service this year, with the sovereign direct and indirect debt totaling only about $3.6 billion of that sum, according to Dragon Capital investment bank. Olena Bilan, a macroeconomics analyst with Dragon Capital, ruled out a sovereign default this year, but said that corporate debt worth $4-5 billion may have to be restructured.
"The market is overestimating the possibility of default," Bilan said. "The situation is bad, but it is manageable."