Prerequisites for default on sovereign obligations of Ukraine, according to experts interviewed by the Agency “Interfax-Ukraine”.
“If we ignore minor fluctuations in the yields of Eurobonds of Ukraine, the market hardly reacted to this statement, which means that the market assesses the probability of re-default as low,” – said the head of Department on work with investors of Bank “Credit Dnepr” Andrey Prikhodko.
A similar view is shared by the chief economist of Alfa-Bank Ukraine Oleksiy Blinov: “No reason to default on sovereign obligations today, no. Ukraine has just successfully passed the peak of foreign debt payments in may and financially ready for the next peak of payments in September,” he said.
Blinov added that since the beginning of 2019, the government and the national Bank paid $5.6 billion in foreign currency debt without any difficulty, adequacy of foreign exchange reserves above 3 months of imports of goods and services, and net foreign exchange reserves exceed $9 billion. “This covers all debt payments for the year ahead. For comparison, in early 2015 (before the restructuring of external debt) net international reserves was zero”, – he added.
Pancakes reminded that due to debt transactions of the Ministry of Finance carried out in 2016-2018, long-term schedule of payments on sovereign debt uniform, he not only avoids the impossibly high peak loads, but also offers a “window” for new Eurobond issues. “At the same time Ukraine is now in the program of the International monetary Fund (IMF), offering refinancing of external debts for a low price of new borrowing. For many years the main problem of the “debt equation” is not in debt and in poor attraction of funds available to the IMF and other international financial organizations,” he said.
As noted pancakes, promotion program with the IMF will allow Ukraine to reduce the weighted average cost of borrowing, and improve the conditions of access of the state and market entities in capital markets. Accordingly, a priority of state economic and financial policy should be to intensify the dialogue with the IMF under the current stand-by program, as well as opening talks about a new financing program.
“In terms of macro-financial stability and sufficient resources for repayment and servicing of the sovereign foreign currency obligations, talk about a “controlled default” are purely theoretical, and in practice have nothing to do with alleviating the debt burden for the country nor with sustainable economic development”, – concluded the pancakes.
Senior analyst at Raiffeisen Bank Aval Michael rebryk, in turn, noted that the potential consequences of a default would be devastating in all aspects: economic, political, social.
“Default will lead to termination of cooperation with the IMF, and as a result – with other financial donors. The output of the state, public and private companies on the market of the financial debt will be virtually impossible because of the high cost of resource. Will start the outflow of capital, which due to the “thinness” of the market will create a significant devaluation pressure on the interbank market and subsequent boom in the cash segment. This is reflected in the increase in prices, the decline in economic activity will cause unemployment growth and increased labour emigration,” said rebryk.
However, he noted that cooperation with the IMF, among other things, is a catalyst for structural reforms in Ukraine to speed up economic development and growth of welfare of citizens.
In addition, the default will likely have a negative impact on international political, diplomatic support for Ukraine, which is critically important in the current geopolitical situation, he said.
Founder and partner of the IG “Univer” Taras Kozak believes that Kolomoisky spoke again about the default because in case of default will inevitably be a gap agreement with the IMF and Kolomoisky will be easier to regain control of PrivatBank or to recover from the state a large sum of compensation.
“In case of refusal of Ukraine from the payment of debts bound to be a gap agreement with the IMF. With the IMF was nationalized Privat. Without oversight by the Fund Kolomoisky will be easier to regain control of the Private. Or to recover from the state a large sum for allegedly causing losses,” he wrote in “Facebook”.