Ukraine will default without donor conference, PM says

By bne IntelliNews December 11, 2014

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Ukraine will default without a donor conference, prime minister Arseny Yatsenyuk told parliament on December 11.

"To avoid a default, we need an international donor conference," Yatsenyuk told deputies.

"For next year, in addition to this programme from the International Monetary Fund (IMF) - this is what the Financial Times writes, not what we say - we need $15bn," Yatsenyuk said, referring to a FT  report on December 10 in which IMF sources put Ukraine's finance gap at $15bn.

"We have received $9bn in international financial assistance from the IMF, the World Bank and other international financial institutions. We have paid back $14bn in debts and credits," Yatsenyuk argued.

"This is a notable change of language from Yatsenyuk who previously drilled home the line that Ukraine would never default," commented Standard Bank's Tim Ash.

Ukrainian press also reported Ukraine's newly appointed economy minister, Lithuanian investment banker Aivaras Abromavičius, telling a parliamentary sub-committee on December 10 that Ukraine was "de facto bankrupt".

Ukraine's sovereign debt has reeled since the FT report on December 10, which also argued that the IMF would not be able to dispense any more funds to Ukraine under its current programme until the funding gap was closed, and that Ukraine's debts to Russia would be an obstacle to raising international support.

Credit default swaps on five-year sovereign bonds hit a five-year high at 2,134bps on December 11. Yield to maturity of Ukraine's eurobonds for redemption in September 2015 soared to 48% on December 10 from 35% on December 9.

A donor conference for Ukraine has been mooted for February 2014, but would likely be too late, according to analysts.

EU finance ministers met on December 9 to discuss Ukraine's financial crisis. Pierre Moscovici, the EU economics chief, said the European Commission was weighing a third rescue programme on top of the €1.6bn ($2bn) it has already committed to Kyiv. But Pier Carlo Padoan, the Italian finance minister chairing the discussion on December 9, said EU resources should only be dispatched if Kyiv made a “stronger effort” towards implementing reforms.

The members of the G7 group of countries have also discussed the possibility of providing $4bn in financial assistance to Ukraine, the Wall Street Journal reported on December 9.

Some analysts argue that the current IMF programme combined with austerity measures and reforms announced by a new government appointed December 2 could see Ukraine through 2015. 

"Another $6bn are expected to arrive from other lenders in 2015," write analysts at Kyiv brokerage Concorde Capital. "With this non-IMF support, Ukraine should have enough funds to cover its foreign currency needs," they add.

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