IGOR MAZEPA ABOUT PROSPECTS OF UKRAINE WITHOUT IMF LENDING23.05.2019
Ukraine is threatened with default no later than a year without cooperation with the IMF and other international lenders. Such a conclusion I made from forecasts of Ukraine’s gross international reserves, which the National Bank of Ukraine published in its latest inflation report.
Ukraine’s gross reserves will barely stay above the critical level of three months of future imports for the next three years (2019-2021), according to the forecast of the National Bank of Ukraine. It’s very undesirable to drop below that level because alarms will go off with every foreign investor and observer about how there’s a problem in Ukraine.
At minimum, they will more meticulously follow the prospects of returning reserves to a safe level. If they don’t see those prospects, they will start to panic. In such case, I would say, we can forget about new foreign investments and loans for Ukraine – stated Igor Mazepa.
The forecasts of a safe level of reserves is based on simple assumptions by the National Bank of Ukraine that during 2019-2021, when we have planned significant expenses for state debt (about $20 bn), we will have the possibility to renew our reserves with IMF financing and other Western lenders at a total amount of $9.7 bn. Ukrainian government will also have access to private loans, with the issuance of Eurobonds, at a total amount of $8.5 bn.
Without IMF credits already at the end of 2019, Ukraine’s gross reserves will surpass the level of distress, but the chances for returning to a safe level will remain.
It’s possible that Ukraine might even be able to attract several billions from private lenders, but only on the condition that they have faith in renewed IMF cooperation.
In order to avoid default, it’s critically important for the Ukrainian government to renew IMF cooperation. Then there will be funds from both Western donors, as well as private lenders.