Ukraine must repay over $5.3 billion in external debt this year.
LONDON, April 19 (Reuters) – Ukraine will not default on its debt, the country’s finance minister said on April 19, adding that the government would be able to meet all its funding obligations in a year of heavy external refinancing needs.
Ukraine must repay over $5.3 billion in external debt this year including $3 billion to the International Monetary Fund but is effectively cut off from international capital markets as the IMF has frozen its aid tranche to the ex-Soviet state.
But asked if there would be a default, Yury Kolobov told reporters in London: “Of course not.”
“We are not experiencing any problem financing ourselves locally, we can get short-term cash at any rate,” he said on the sidelines of the annual Adam Smith conference.
“We will soon decide what to do but we do have a choice, there are many options.”
He declined to say what the options were.
Finance Minister Yury Kolobov.
The government has said in the past it could try to raise cash on local bond markets where high yields have attracted investors.
One-year hryvnia t-bills currently yield 20 percent while the Treasury has also raised cash locally in dollars.
Kolobov earlier told the conference: “Speaking on a topic which interests a lot of people, that is, funding, and speaking as a state representative, I can confidently say we have no worries. All those figures that we put in to the budget… we will meet all our obligations without any problems.”
Central bank board member Olena Scherbakova also assured investors there would be no default, noting policymakers were considering both internal and external debt markets.
“It is not a matter of paying or not paying. Repayment of debt is important for the country’s image. So certainly we will have to find means,” she said. “If there is a window to tap the international markets, the country will go to international markets. We are working both internally and externally.”
The energy and gas subsidies are imposing a very significant burden on the budget. Reforms in this sector are necessary.– Max Alier, International Monetary Fund
But tapping global markets could prove tough unless the IMF unfreezes its $15 billion aid program to Ukraine.
This looks unlikely to happen soon as President Viktor Yanukovych’s party, preparing for October elections, has launched $3 billion in extra spending and is refusing to meet IMF demands to cut huge subsidies of prices of imported gas.
Ukraine’s IMF resident representative, Max Alier, told the conference that the fund was ready to support the country as long as it complied with the IMF’s demands, particularly in relation to energy subsidies for households.
“Some progress has been achieved but in some areas, we believe, the key progress has not been as positive,” Alier said. “The energy and gas subsidies are imposing a very significant burden on the budget. Reforms in this sector are necessary.”
