The Ukrainian government is committed to the implementation of policies which will restore stability to government finances and bring much needed growth and jobs to the Ukrainian economy. These policies have been developed with the full support of the IMF and other multilateral institutions, as well as Ukraine’s international friends and partners in the G-7. While the corrupt legacy of the previous regime coupled with the crippling effects of Russian aggression toward Ukraine mean that the path for Ukraine is not an easy one, the government is committed to ensuring a more prosperous and secure future for the Ukrainian people.
The burden of the current economic and financial situation in Ukraine cannot be shouldered solely by the Ukraine people, who have already paid a very heavy price. This principle is recognized in the EFF program agreed between the IMF and Ukraine, which stipulates that the financial stabilization effort must be shared by three groups:
(1) the IMF ($17.5 billion in fresh financing), (2) official lenders ($7.2 billion in fresh financing) and (3) international creditors ($15.3 billion via a debt operation).
The first two groups have already contributed. The IMF has provided the first tranche of its committed funding earlier this year, and Ukraine has signed several international agreements with international partners, including the US, the EU, Japan and Canada. The next tranche of IMF funding will be provided after the first review of the program has been completed, hopefully in the coming weeks.
Ukraine’s international sovereign 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. 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 program. They have instead proposed to use our foreign exchange reserves to repay external debt in order to avoid absorbing any financial losses in the current situation.
It is against this backdrop that the government is seeking to intensify negotiations with the Ad Hoc Committee. The government is committed to finding a collaborative solution that will ensure a successful debt operation to reduce the unsustainable debt burden and create the conditions for economic recovery. The government recognizes that the creditors may not be prepared to agree, and may continue to block progress toward a solution. In this case the government is prepared to use its existing legal power to suspend payments to international commercial bondholders in order to consolidate Ukraine’s economy and preserve Ukraine’s financial resources until an acceptable deal is agreed.
Ukraine government’s policies enjoy the support of the IMF and the G7 who both agree that the international commercial creditors must share the burden and make an equal effort. Ultimately, the goal of the government is to protect the Ukrainian people and we are ready to take any step to ensure that the interests of Ukraine are fully defended.