FT Interview with
Hryhoriy Nemyria
___________________________________
YULIA TYMOSHENKO
Official
Website
GOVERNMENT
PORTAL
Inform
SUBSCRIBE
IMF Has Not Abandoned Ukraine
19 November 2009
Published in
Inform
issue #131
See the full issue here.
The International Monetary Fund (IMF) has not abandoned Ukraine. This was the message from Deputy Prime Minister Hryhoriy Nemyria who told Inform that IMF officials could resume talks to discuss its next loan payment provided the president, national bank and the cabinet of ministers agree to implement clauses stipulated within the IMF cooperative agreement. The comments came as Fitch Ratings downgraded Ukraine one notch to B-, maintaining a negative outlook.
The basis of the Fitch downgrade is due largely to the IMF withholding a $3.8 billion next tranche payment from the $16.4 billion stand-by facility agreed last year. The loan is desperately needed to help bolster the government’s finances. Ukraine still finds itself in the grip of a severe recession and is bracing itself ahead of steep winter gas bills.
See the full issue here.
The International Monetary Fund (IMF) has not abandoned Ukraine. This was the message from Deputy Prime Minister Hryhoriy Nemyria who told Inform that IMF officials could resume talks to discuss its next loan payment provided the president, national bank and the cabinet of ministers agree to implement clauses stipulated within the IMF cooperative agreement. The comments came as Fitch Ratings downgraded Ukraine one notch to B-, maintaining a negative outlook.
The basis of the Fitch downgrade is due largely to the IMF withholding a $3.8 billion next tranche payment from the $16.4 billion stand-by facility agreed last year. The loan is desperately needed to help bolster the government’s finances. Ukraine still finds itself in the grip of a severe recession and is bracing itself ahead of steep winter gas bills.
The path out of the recession was made harder when
President Viktor Yushchenko refused to use his
power of veto and signed into law huge rises in the
minimum wage and pensions. The budget busting move,
which Fitch estimates could result in an 11 percent
budget deficit in 2009, contravened IMF conditions
to reign in public spending and an agreed deficit
for the year of 6 percent of GDP. Consequently, the
IMF has put off any notion of making the next
tranche payment to Ukraine unless the matter is
resolved.
In a move that borders on the truly bizarre, President Viktor Yushchenko – after ignoring IMF advice – declared himself one of the world’s best bankers. “I'm an economist and financier. I think that I'm among the top five bankers in the world," he said last Thursday. As if to rub salt into the wounds he said that he could "easily" break down and unscramble any economic situation and problem.
An unimpressed Prime Minister Yulia Tymoshenko told a meeting of G8 ambassadors that she intends to challenge the budget busting law in Ukraine’s Constitutional Court.
The President of the Centre for Social Studies, Andrey Yermolayev doubts Ukraine’s politicians will reach a consensus before next year’s presidential elections, which are slated for 17 January, 2010. “Maybe they will have consultations that will result in a declaratory document, let’s say a letter to the IMF, for instance. But it is imperative that legislators support such effort. Rada members are the only guarantors that any promises given by the government are supported by legislation and reflected in the budgets for 2009 and 2010. It is a possible but very unlikely situation.”
Gas Supplies to Europe
Pressure will be put on the government to urge the National Bank of Ukraine to print money to pay for the wage and pension rises, but this would only weaken the country further by causing inflation. Of more concern to Europe is the worry that without IMF support, Ukraine will be unable to meet future gas payments to Russia. Last Friday, Moscow’s EU envoy, Vladimir Chizhov, called on the EU to take measures, including financial, to prevent problems arising in Russian natural gas transit via Ukraine to Europe.
Yet Ukrainian officials have said that they do not envisage a rerun of last January’s bruising gas dispute. "We are taking extraordinary efforts to pay for natural gas, including for November, on time, without delay and in full," said Prime Minister Yulia Tymoshenko.
Mr Nemyria also pointed out that Ukraine has put into store 25 billion cubic metres of natural gas, which should ensure the uninterrupted flow of gas supplies to Europe.
On a positive note Ukraine’s state run gas company has completed successfully a restructuring of its external debt with the settlement of a new bond. This was a $1.595 billion five-year Eurobond with a sovereign guarantee in exchange for Naftohaz’s earlier Eurobond and three bilateral loans. Its completion represents a notable market success despite initial resistance from some bondholders. And from a sovereign perspective, Ukraine is over the hump of debt needing to be serviced in 2009. Another state run business, Ukrzalyznitsya, the State Railway Transport Administration of Ukraine, is looking to restructure a $110 million loan.
Meanwhile, government officials are frantically trying to bring about a resolution that will allow the IMF back to the table.
In a move that borders on the truly bizarre, President Viktor Yushchenko – after ignoring IMF advice – declared himself one of the world’s best bankers. “I'm an economist and financier. I think that I'm among the top five bankers in the world," he said last Thursday. As if to rub salt into the wounds he said that he could "easily" break down and unscramble any economic situation and problem.
An unimpressed Prime Minister Yulia Tymoshenko told a meeting of G8 ambassadors that she intends to challenge the budget busting law in Ukraine’s Constitutional Court.
The President of the Centre for Social Studies, Andrey Yermolayev doubts Ukraine’s politicians will reach a consensus before next year’s presidential elections, which are slated for 17 January, 2010. “Maybe they will have consultations that will result in a declaratory document, let’s say a letter to the IMF, for instance. But it is imperative that legislators support such effort. Rada members are the only guarantors that any promises given by the government are supported by legislation and reflected in the budgets for 2009 and 2010. It is a possible but very unlikely situation.”
Gas Supplies to Europe
Pressure will be put on the government to urge the National Bank of Ukraine to print money to pay for the wage and pension rises, but this would only weaken the country further by causing inflation. Of more concern to Europe is the worry that without IMF support, Ukraine will be unable to meet future gas payments to Russia. Last Friday, Moscow’s EU envoy, Vladimir Chizhov, called on the EU to take measures, including financial, to prevent problems arising in Russian natural gas transit via Ukraine to Europe.
Yet Ukrainian officials have said that they do not envisage a rerun of last January’s bruising gas dispute. "We are taking extraordinary efforts to pay for natural gas, including for November, on time, without delay and in full," said Prime Minister Yulia Tymoshenko.
Mr Nemyria also pointed out that Ukraine has put into store 25 billion cubic metres of natural gas, which should ensure the uninterrupted flow of gas supplies to Europe.
On a positive note Ukraine’s state run gas company has completed successfully a restructuring of its external debt with the settlement of a new bond. This was a $1.595 billion five-year Eurobond with a sovereign guarantee in exchange for Naftohaz’s earlier Eurobond and three bilateral loans. Its completion represents a notable market success despite initial resistance from some bondholders. And from a sovereign perspective, Ukraine is over the hump of debt needing to be serviced in 2009. Another state run business, Ukrzalyznitsya, the State Railway Transport Administration of Ukraine, is looking to restructure a $110 million loan.
Meanwhile, government officials are frantically trying to bring about a resolution that will allow the IMF back to the table.