• Igor Mazepa

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Igor Mazepa: where Ukraine can find $8 bln to pay debt in 2019

A three-year grace period concludes in 2019 during which the Ukrainian government and large enterprises didn’t pay their foreign commercial debt. This means that payments from the state budget and the coffers of state companies will grow to unprecedented levels. In just the next 14 months, Ukraine is supposed to pay foreign creditors USD 7.3 bln. A part of the government’s foreign currency debt to state banks should be added to this sum – no less than USD 500 mln. These banks were always ready to overextend loans to the government in foreign currency, but not this time. After all, they will need this foreign currency to pay off their USD-denominated debt (their payment to foreign creditors will exceed USD 1 bln in the next year).

Accordingly, the government will need to find about USD 8 bln in all. Having a budget deficit, our government won’t be able to return all its debt using resources collected from taxpayers.

By the way, to pay a large part of this debt, the government can find (or already has found) foreign financing:

It will be critical for our government to find an additional USD 3 bln in 2019. And that will be possible with IMF support.

The minimum program involves receiving positive recommendations from the IMF, after which the government can count on another Eurobond placement. The maximum program involves a new IMF tranche (USD 1 bln) and one more tranche of macroeconomic aid from the EU (EUR 0.5 bln), as well as from other Western governments. At that, counting on that is possible only under the conditions that all the IMF’s requirements listed in the new memorandum will be completely fulfilled. Therefore, whether we want it or not, cooperation with the IMF is the single chance to get through 2019 painlessly – summarizes Igor Mazepa.