Ukraine's new $17.5-billion loan program provided by the International Monetary Fund doesn't mean paying off the country's public debt won't be rescheduled. However, the country faces payments on $11 billion in foreign obligations this year alone - and billions more until 2019.
However, Finance Minister Natalie Jaresko hopes to shave $15 billion off the amount in the next four years through restructuring talks with creditors.
“In March, we will start negotiating with our bond holders on restructuring,” Jaresko said during the Feb. 17 conference in Kyiv. “We will continue being a good borrower. Days will come – and we’ll become good creditor.”
She also commented on Ukraine’s $3 billion debt to Russia, based on a eurobond issued in 2013 that many say should be treated as odious without paying it back.
“We’ll be treating all our creditors on an equal basis,” Jaresko mentioned. “We look forward to meeting with all our creditors for consultations. We haven’t had official communication with Russia on this yet.”
The finance minister said the Cabinet has revised the nation’s budget for 2015. Now it projects a 5.5-percent gross domestic product contraction, while production of goods and services will reach Hr 1.85 trillion, which is $71 billion based on a current exchange rate.
Moreover, Cabinet foresees a deficit of 4.1 percent of gross domestic product, 0.4 percentage points higher than in the version of the budget that was passed in December. Revised revenues will reach Hr 599 billion, while the previous version had Hr 576 billion. Spending will stand at Hr 664 billion, up from Hr 628 billion planned in December.
Besides increase in utilities tariffs, the Finance Ministry is “trying to balance pension fund deficit,” according to Jaresko. This will be done through reducing of the pension payments for those pensioners who keep working and cutting so called special pensions which are being paid to the high officials of Soviet era.
U.S.-born Jaresko, 49, headed Horizon Capital, a private equity fund, prior to taking Ukrainian citizenship and joining the Cabinet of Prime Minister Arseniy Yatsenyuk.
International financial organizations, a sole source for external borrowing that Ukraine has, demand the country to go through the austerity measures in order to qualify for the $40-billion bailout package through 2019.
On Feb. 14, credit rating agency Fitch downgraded Ukraine’s debt down to CC due to a high level of public deficit in 2014 that reached 13 percent of GDP that fell by 6.7 percent with a 15.2-percent contraction in fourth quarter alone.
Such a low rating won’t allow Ukraine to borrow money from the international market in the nearest future.
Country’s eurobonds maturing next year have yields of 48-60 percent, a high figure even by the emerging market standards. This is a reflection of a high probability that repaying those bonds will be rescheduled.
Kyiv Post associate business editor Ivan Verstyuk can be reached at [email protected].
