Ukraine Promises To Repay IMF This Year

KIEV, Ukraine -- Ukraine, seeking to alleviate concerns over its ability to repay debt, on Tuesday pledged to pay the remaining $1.6 billion bill from the International Monetary Fund before the end of the year.

NBU's Olena Shcherbakova

The bill is part of a debt that must be repaid to the IMF this year and comes after the country managed to pay $4 billion earlier this year.

The pace of debt repayments has been causing concerns among analysts because the cash-strapped government has failed to win resumption of its $15.5 billion loan from the Washington-based lender.

“Everyone knows that we have to pay the IMF,” Olena Shcherbakova, the head of the monetary and credit department at the National Bank of Ukraine, said at a conference call.

“We paid $4 billion. There is a bill for $1.6 billion, and it will be paid.”

The comments come less than two weeks after Moody's Investors Service cut Ukraine's sovereign credit rating further into junk category and warned that more downgrades could come.

Moody's cut the rating by one notch to Caa1 from B3, with the outlook placed on review for downgrade, as it cited concerns over a drop in foreign currency reserves, new debt issuance and potentially worsening relations with Russia.

Shcherbakova rejected these concerns.

"Ukraine always pays its debts. We fulfill our obligations,” Shcherbakova said.

“At the NBU there are no fears that the country may not pay its debts.”

Separately, the NBU reported on Tuesday that Ukraine’s balance of payments surplus widened to $1.7 billion in January through August, up from $315 million in the same period a year ago.

“The balance of payment remained in the positive territory,” the NBU reported. 

Ukraine is currently in talks with the IMF on the $15.5 billion loan.

First Deputy Prime Minister Serhiy Arbuzov said that Ukraine plans to use the loan to repay previously borrowed IMF loans with repayments totaling about $6 billion this year.

For almost two years Ukraine unsuccessfully tried to persuade the IMF to resume lending despite the government’s refusal to hike natural gas prices for households. 

Raising the gas prices is the only key condition imposed by the IMF that has not been implemented by the government.

The government refuses to hike the prices amid fears of political fallout for President Viktor Yanukovych, who is facing re-election in March 2015.

Source: Ukrainian Journal