Jaresko: Tough stand against foreign creditors.

AFP/Kiev

A vicious fight broke out in the open yesterday between Ukraine’s cash-strapped government and its foreign creditors over billions of dollars in debt that are up for negotiation next week.
Ukraine’s US-born finance minister accused the powerful group of US investors of stonewalling excruciating talks aimed at helping Kiev plug a yawning budget hole and avoid slipping into technical default.
The lenders shot back with a quickly-drafted statement accusing Ukraine’s portrayal of events as “inaccurate”.
The exchange set an ominous tone for IMF-led debt restructuring negotiations Ukrainian Finance Minister Natalie Jaresko has decided to skip—a surprise announcement made Thursday that further dampened hopes of progress.
Franklin Templeton and three other US financial titans own about two-thirds of the debt upon which Ukraine is trying to find savings of $15.3bn (€13.7bn) over the coming four years.
That target is part of a $40bn global package the International Monetary Fund patched up to help the ex-Soviet nation weather an economic implosion that was only exasperated by the pro-Russian revolt in its industrial east.
Jaresko said the first two lines of the international rescue had already been secured.
The IMF has vowed to proceed with payments on its $17.5bn loan to Ukraine even if no immediate solution to the commercial debt debate is found.
Other “official lenders”—Ukrainian allies stretching from the European Union to Japan—have also pledged to deliver $7.2bn in new assistance by 2018.
Ukraine’s international commercial creditors, “represented by the Ad-hoc Committee, is the only one of the three groups which has so far refused to contribute to Ukraine’s recovery,”Jaresko said in a statement.
“For three months, despite the urgency of our situation, they have refused to engage in substantive negotiations on the terms of a debt operation meeting the three targets established in the IMF programme.”
The so-called Ad-hoc Committee of Noteholders to Ukraine—owed $8.9bn of the money under dispute—responded within three hours of Jaresko’s unusually blunt charge.
“The Committee regards Minister Jaresko’s comments that international creditors have ‘refused to contribute to Ukraine’ as inaccurate,” the US group said in a statement released to AFP.
“Since 9th May the Ministry of Finance has been in possession of a full, comprehensive restructuring proposal that meets all IMF criteria and offers nearly $16bn of relief for Ukraine.”
The sides’ failure to find a debt compromise carries unpredictable consequences for Kiev’s Western-backed leadership—already under pressure from Moscow and domestic discontent with the lingering war.
The IMF promises to support Ukraine as long as it remains committed to an unpopular but much-delayed break with its communist-era subsidies programme and tradition of sweetheart business deals.
Jaresko said she hoped to see the Fund’s next payment of $1.7bn approved “in the coming weeks”.
Kiev’s international allies are pitching in as part of their own effort to keep the strategic east European nation from slipping back into its historic reliance on Russia—an uneasy neighbour that denies involvement in Ukraine’s separatist war.
But a technical default sparked by the lack of a commercial debt compromise would make the longer-term cost of borrowing even more expensive and push back Ukraine’s prospects for a quick return to growth.
Economists believe that Ukraine could easily cover the relatively small interest payments due in the next two months.
But it may have a much tougher time serving more than $500mn in debt owed in September.
Kiev has warned on repeated occasions that it may impose a repayment moratorium of no quick debt solution is found.
Jaresko said Ukrainian debt negotiator Vitaliy Lisovenko will be travelling to Washington in her place because the talks were little more than “a technical conversation—not negotiations”.