Ukraine might apply debt moratorium if no creditor progress soon

Finance Minister of Ukraine Natalie Jaresko told journalists on June 10 that the government will be ready to introduce a debt moratorium if talks with its creditors on debt restructuring will last past the summer, according to the Reuters news agency. “I don’t think we have that much time,” she said. “I’d have to use other tools to reduce the pressure on the balance of payments. A moratorium.” She declined to state whether the government will pay its coupon to bondholders next week, Reuters said. Jaresko also shared her expectations that Ukraine will receive the USD 1.7 bln in second tranche of the IMF’s Extended Fund Facility program in July, even if there is no debt restructuring agreement by then.

Alexander Paraschiy: Jaresko, who is currently visiting the U.S. with a state delegation, seems to have received solid support from the IMF that enables her to be more assertive in her attempts to restructure Ukraine’s debt. A moratorium on debt repayment is the most powerful argument that the Ukrainian government has. What’s strengthening its position is a hint from IMF top official David Lipton that the moratorium won’t necessarily stop the IMF’s cooperation with Ukraine.

We see the government demonstrating the seriousness of its intention to use the moratorium during the next 10 days. The first opportunity for that will surface on June 17, when a USD 39 mln coupon on a USD 1.25 bln Eurobond maturing in 2016 is due. The next opportunity that Ukraine is more likely to use will be on June 20, when the government is due to pay USD 75 mln coupon on a USD 3.0 bln Eurobond that is held by the Russian National Welfare Fund.