Ukraine leaves open possibility of defaulting at end of July

The Ukrainian government can stop paying to its external creditors before reaching “an acceptable agreement” with them, the country’s Finance Minister Natalia Jaresko said in statement on Friday.

“The government is ready to use its legal right to stop payments to international external creditors in order to protect the Ukrainian economy and preserve its financial resources until an acceptable agreement [on restructuring the country’s debt] with the creditors is reached,” she said.
The finance minister said that the holders of Ukrainian state debt “have until now refused to contribute to restoring Ukraine.” “Our aim is to save $15.3 billion in the next four months. We will not be able to secure fast restoration of economy without it. Today’s spending on servicing the state debt is overwhelming,” Jaresko stressed.

Ukraine leaves open the possibility of defaulting at the end of July due to difficult negotiations with the country’s creditors. “It is theoretically possible,” Jaresko said, answering a question on whether the country can announce default if it fails to make another coupon payment worth $120 million due on July 24.

The Committee of private creditors said on June 24 that Ukraine’s intention to write off part of its state debt and lower interest payments in the framework of restructuring will decrease the possibility for the country to enter foreign capital markets and increase its dependence on institutional creditors. Instead of writing off the debt, the Committee advised Kiev to delay repayment to 2019.

Russian Finance Minister Anton Siluanov said that it is not in Kiev’s interests to stop servicing its external debt as it contradicts the conditions of the International Monetary Fund (IMF) program. “It [defaulting in July] will be strange, [it is not clear] how it will correspond with implementing the program of the International Monetary Fund which does not envisage defaulting,” Siluanov said.