Ukraine seals debt revamp agreement
Print Edition
Ukraine yesterday said it has reached a crucial debt restructuring deal that will see lenders accept a 20 percent write-down and keep global markets open to the cash-strapped country.
The announcement marks a monumental victory for Finance Minister Natalie Jaresko — a US-born financial expert whom President Petro Poroshenko plucked from a Kiev investment firm in December and tasked with saving the war-torn country from hurtling into default.
Prime Minister Arseniy Yatsenyuk called the deal as a blow to “enemy” Russia.
Franklin Templeton and three other financial titans that own nearly half of the US$19 billion in commercial debt under discussion had argued that the east European nation was in strong enough shape to repay what it owed in full.
“I think it’s a historic success for Ukraine, I think for emerging markets generally,” Jaresko said in an interview conducted shortly before Yatsenyuk made the formal announcement at a televised government meeting.
The painful talks lasted for five months and saw the International Monetary Fund and the US put immense pressure on bondholders to accept short-term losses in return for keeping Ukraine’s pro-Western leaders from being forced into resuming their reliance on Russia.
Ukraine’s economy is set to shrink by nearly 10 percent this year due to the loss of key coal and steel mining factories in the pro-Russian separatist east, which saw industrial production plummet by about a fifth over the first six months of the year.
The agreement was followed quickly by the Ukrainian central bank’s decision to lower its main interest rate to 27 percent from 30 percent — a high figure that still signaled expectations of more stable economic times ahead.
“Why is (the deal) important?” said Jaresko in the English-language interview.
“We were already at the point as a country where the commercial creditors said: ‘Too risky.’ Now the official creditors said: ‘Within limits, we will support you.’”
The possibility of Ukraine either outright defaulting on its obligations or imposing a payment freeze could have shut Kiev out of global borrowing markets.
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