You're reading: Ukraine to postpone borrowing until July

Kuchma warns debt could destabilize hryvna

June borrowing on international markets until July or August due to a financial crisis, Deputy Prime Minister Serhy Tyhypko told a news conference on Friday.

'I don't think we will be able to enter the market in June, but we will try in July,' Tyhypko said. 'We will attempt all this [foreign borrowing] in July and if not we will move it to August.'

Tyhypko did not specify exactly what he meant by foreign borrowing.

Ukraine, facing a cash crunch due to rising domestic debt and unpaid pensions and wages, has said it plans to borrow up to another $2 billion abroad on top of existing borrowings of about $1.1 billion this year. It had been planning to issue a Eurobond in June and perhaps another in July.

It also wants a three-year Extended Fund Facility, possibly worth around $2.5 billion, from the International Monetary Fund. Officials said earlier this week Ukraine expects a foreign fiduciary loan of over $100 million in June or early July.

Tyhypko's announcement came a day after President Leonid Kuchma said that Ukraine's state debt was approaching critical levels, and that he was concerned the financial crisis could destabilize the currency.

'To preserve stability we have to resort to significant domestic and external borrowing. The volume of the state debt is approaching a critical level,' Kuchma said in a televised address. 'I am especially concerned that the financial crisis could hit the stability of the hryvna.'

Kuchma said he was ready to bypass parliament, which has failed to pass any key reform legislation since convening a month ago, and issue decrees to streamline the tax system and effect other reforms necessary to improve the economy.

Earlier this week Deputy Finance Minister Volodymyr Matviychuk said Ukraine planned to borrow Hr 1.75 billion ($849.9 million) abroad in July.

Ukraine, where reform has proceeded at a snail's pace, must fulfil more than 90 conditions to receive the EFF loan.