Ukraine must meet its debt obligations or it must default, Russian Deputy Finance Minister Sergey Storchak said in an interview with the Rossiya 1 television channel Friday.
Storchak added that if Ukraine did not meet its €75 million ($84.2 million) payment on June 22, it would seek redress in international courts.
The Russian demand came after Ukraine Finance Minister Natalie Jaresko’s statement Thursday that Ukraine could impose a moratorium on all its debt payments if creditors do not accept a restructuring plan.
Ukraine is also under pressure from its private creditors, which hold more than half of its $70 billon sovereign debt.
“Minister Jaresko has been in possession of a detailed IMF-compliant solution from the Bond Committee for over a month,” the committee, which is a group of private creditors, wrote in a statement Thursday. “We are deeply concerned about the stance the minister is taking, which is not in the interests of Ukraine. We are ready and willing to start talks at any time,” it added.
But Ukrainian officials do not think that the creditors have a realistic attitude to the challenges the country is facing. The conflict with pro-Russian separatists has put severe pressure on the country’s finances – it reportedly costs the government about €5 million ($5.6 million) every day.
Ukraine’s Ambassador to Turkey Sergiy Korsunsky said: “As Prime Minister of Ukraine Arseniy Yatsenyuk stated in Washington on June 11, 2015, our position remains unchanged: debts of Ukraine to private investors must be restructured.
“Those finances that Ukraine has been receiving from state actors, like the EU and the U.S., help us a lot economically while Ukraine fights against the Russian aggression. We expect the private investors to understand that the situation right now is very complicated and [they must] help Ukraine by restructuring its debts.”
Korsunsky added that the International Monetary Fund and the U.S. government agreed that everyone must make its contribution. “It is not a caprice of Ukraine, it is a necessity. There is no other way than restructuring the debts and allowing Ukraine to go out of this difficult economic situation caused, first of all, by the Russian aggression against our country. We will definitely pay our debts, but a little bit later,” he said.
Jaresko told reporters in Washington Thursday that while she was ready to sit down with creditors at any time, the government could not wait much longer.
The IMF has asked Ukraine to finish its debt restructuring by the end of this month. It has, however, given Ukraine a stronger position with its creditors, by allowing the country to continue to receive tranches of the $17 billion in bailout payments that it is receiving from the IMF, should Ukraine miss debt payments to creditors, the IMF announced Tuesday.
Jaresko said Thursday that any agreement with creditors would have to meet three criteria fixed under the IMF’s bailout plan: A $15.3 billion reduction in debt servicing costs over the next four years, a lowering of Ukraine’s debt load to 71 per cent of Gross Domestic Product, and a guarantee that the government’s financing costs in the future would not go above 10 percent of GDP.
Creditors demand that Ukraine meet debt targets under their proposal, but that would involve the withdrawal of $8 billion from central bank reserves. Jaresko said that this would be illegal under Ukrainian law.
The Ukrainian economy is under heavy pressure, as the “Global Economic Prospects” report from the IMF, released Wednesday, showed.
“In Ukraine, output contracted by 6.8 percent in 2014, reflecting a deep decline in the conflict-affected east and a moderate recession in the rest of the country. Exports fell sharply, as exports to Russia (one-quarter of exports in 2010–14) dropped by one-third,” the report said.
The exchange rate of the Ukrainian hryvnia against the U.S. dollar tripled between end-December 2013 and end-February 2015, the report said. Inflation was up to 60.9 percent in April 2015.
It is only thanks to a $5 billion payment of bailout funds by the IMF in March, the Ukrainian government continues to be able to function, the report added.
By Andrew Jay Rosenbaum
Anadolu Agency
enerji@aa.com.tr