Today, the Ministry of Finance sent an updated proposal to the Ad-Hoc Committee of creditors ("Committee") in order to accelerate negotiations on the restructuring of sovereign and sovereign-guaranteed debt. This updated proposal takes into account the recent deterioration of the macroeconomic forecast under the IMF supported Extended Fund Facility (EFF) program.
This proposal includes significant debt reduction, maturity extensions, and a coupon structure ensuring Ukraine’s debt burden is sustainable in the medium term, managing the pressure on Ukraine’s balance of payments and its financing needs. Furthermore, it proposes a value recovery instrument for debtholders should the situation significantly and durably improve beyond the projections of the EFF Program.
The Ministry strongly urges the Committee to come to the table immediately to reach a negotiated solution in the nearest time.
Ukraine has both a liquidity and a solvency problem. Therefore, reprofiling its debt will not be sufficient. A simple debt extension does not resolve the massive pressure on Ukraine’s financial system from the debt load, largely placed on the country by the Yanukovich regime which had borrowed approximately US$40 billion.
Moreover, international reserves managed by the National Bank of Ukraine cannot be used to repay sovereign debt and raiding reserves would hinder Ukraine’s return to financial health. This point was confirmed in the statement of IMF Managing Director Christine Lagarde of June 12. Therefore, proposals by the Committee to use US$8 billion of those reserves to repay 40% of the sovereign debt cannot and will not be accepted. Instead, a debt reduction is needed, as repayment capacity of Ukraine is limited to its fiscal capacity.
Today, Ukraine remains current on its obligations, including the coupon due on the Eurobond maturing in December 2015. However, the Ministry notifies creditors within the debt operation that, unless a negotiated solution is found in the weeks to come, it will be forced to use the tools available to the Ukrainian Government and provided recently by our coalition partners in the Parliament in order to maintain and strengthen the nation’s financial health.
In this debt operation, the Ministry has, is, and will continue to take all steps necessary to protect the interests of the Ukrainian people. Ukraine's leadership remains united and fully committed to this goal.