You're reading: US adds $2 billion to loan guarantee pledges, for $3 billion total to Ukraine

The U.S. government wants to provide Ukraine with $2 billion in new loan guarantees so that the nation, whose poor credit rating wouldn't allow it to sell more eurobonds, can borrow money. The agreement was reached on Jan. 28 in Kyiv during U.S. Treasury Secretary Jacob Lew's visit with his Ukrainian Finance Minister Natalie Jaresko.

“This will allow Ukraine to do the reforms more actively and get the loans on better terms,” said Jaresko. “We are grateful to the U.S. government for their support of Ukraine, especially at such a hard time.”

Moreover, the American Congress passed a decision to provide an additional $1 billion loan guarantee “if Ukraine goes on with the reforms,” according to Lew. “Today, we’ve signed the declaration on this intention.”

“The loan guarantees are provided so Ukraine could handle its social spending and protect those who will suffer from the negative impact that the reforms might have,” he said.

Lew called Ukraine’s government the most “reform-oriented” one in the country’s history, emphasizing its anticorruption program and cutting the energy subsidies. The latter brought as many as 200 coal miners to the Cabinet office in Kyiv on the very same day when Lew was visiting it.

Last year, Ukraine issued a $1 billion five-year eurobond under the U.S. guarantees, its yield stands at 1.3 percent as of now, while country’s sovereign eurobond maturing in 2020 has a yield of 22.6 percent.

Ukraine’s public debt currently stands at $69.8 billion. Meanwhile, Cabinet expects the fiscal deficit to stay below $4 billion this year, while the economy will shrink by 4.3 percent with a 13.1 percent inflation.

Besides the financial issues, Lew commented on Ukraine’s military conflict with Russia that pushed Ukraine towards the full-scale economic crisis.

“Ukraine’s struggle for peace is facing many challenges. Russia-backed separatists is an example of violence that’s trying to stop country which took the democratic path,” he said. “U.S. keeps its commitment to support Ukraine’s democracy against the Russian aggression.”

“As President Barack Obama said, we’ll continue the consultations with our partners on how to stand against the violence,” Lew emphasized. “The diplomatic way is our first choice for conflict resolution, but we may do further steps and put more pressure on Russia.”

“However, if Moscow follows the Minsk agreements, sanctions could be eased.”

Editor’s Note: The story has been updated on Jan. 28 to include Finance Ministry’s fresh data on Ukraine’s public debt.

Kyiv Post associate business editor Ivan Verstyuk can be reached at [email protected].