You're reading: Azarov: Ukraine eurobond issue could exceed $1.3 billion

Ukraine is pressing ahead with plans for a eurobond issue in 2010 that may exceed $1.3 billion if favourable market conditions emerge, Prime Minister Mykola Azarov said on Thursday, June 10.

In an interview with Reuters, Azarov gave no details about talks between Ukraine and its chief lender, the International Monetary Fund, on a new stand-by programme of up to $19 billion.

But his comments, in reply to questions, indicated that the Eurobond issue plans would go ahead this summer even if talks on the new IMF programme have not been completed.

"We don’t need money so badly that we are ready to borrow under any circumstances. Ukraine will borrow only under those conditions we consider advantageous for us. So we are conducting negotiations (on the Eurobond issue) and we will hope that they will be successful for Ukraine," he said.

Asked if Ukraine might borrow more than the $1.3 billion envisaged in the state budget, he replied: "Yes. The law on the budget allows the Finance Ministry to carry out borrowing in a volume that it considers necessary."

The ex-Soviet republic was last on the market in 2007 — before the global crisis devastated its key export markets — when it raised $500 million from a five-year eurobond.

Its determination to press on with a 2010 issue suggested Azarov’s government was confident of its fiscal plans and its budget figures for the year. JP Morgan, Morgan Stanley and VTB are managing the issue.

2009 SLUMP

Ukraine needs IMF credit to help its economy recover from a 15 percent slump in 2009.

The 2010 budget has a deficit target of 5.3 percent of gross domestic product and the government says it will reduce this by one percentage point a year, but the Fund says it wants to see more ambitious targets on fiscal tightening and curbing inflation.

Azarov said the actual deficit in the first five months of 2010 was 1.4 percent of GDP while the central bank’s reserves had grown by $2 billion within the last two months.

Azarov, who earlier this year said he expected an agreement on a new IMF credit deal to be reached in May, would not be drawn on either the scale of the possible IMF package or when it would be nailed down.

"The negotiating process is going on normally. We meet (with the IMF) regularly and fruitfully. We are talking about a programme of reform and this therefore requires a lot of time …," he said.

The Fund last year suspended Ukraine’s $16.4 billion rescue programme because the former administration of Viktor Yushchenko, who was at odds with his government, reneged on promises of financial restraint.

Azarov, in the interview, was at pains to emphasise that his new government aimed to restore "stability and reliability" in its economic dealings. Ukraine’s high short-term domestic debt, issued often with sky-high yields, has been a worry to investors though it has managed to repay in full and on time treasury bills maturing this year.

Azarov expressed confidence that Ukraine would continue to meet its debts and those run up by the previous government of Yulia Tymoshenko.

"I do not see any danger of Ukraine being unable to settle its obligations … I have no doubts at all," he said.

Poul Thomsen, Deputy Director of the IMF’s European Department, said this week in Kiev the Fund was worried about Ukraine’s foreign debt which had reached 40 percent of gross domestic product.