Saturday, June 13, 2015

Time to Settle the Bill: PM Yatsenyuk Hesitates, Asks for Debt Restructure

Ukraine’s foreign debt should be restructured on reasonable terms for Kiev, otherwise the government will not repay loans, Prime Minister Arseniy Yatsenyuk said.
Ukraine owes $42 billion to its foreign creditors. The government offered its private lenders a reconstruction plan to try to repay its debt, the prime minister said.
"We didn't borrow this money, but we'll restructure it [foreign debt], we'll remove the burden from our future generations," Yatsenyuk said, adding that the debt has to be restructured on favorable terms for Kiev, otherwise Ukraine will crumble.
Yatsenyuk also blamed the previous government of Viktor Yanukovych, stating that it was the former president who borrowed all this money. Thus, creditors, in his mind, should cut some slack for the new government now.
A few weeks ago, Oleksandr Klymenko, the former Ukrainian Minister of Revenue and Duties, said Ukraine won't be able to repay its debts. Klymenko said that at the current rate of the country's debt, every single Ukrainian, including the elderly and children, must pay almost $1,000 to foreign creditors.
Ukraine owes the lion's share of its debts (about 80 percent) to US banks, some 6 percent to Russia and 4 percent to the EU and China. The largest private lender to Ukraine is US Investment Company Franklin Resources to which the country owes $6.5 billion, Klymenko said.
To pay off foreign creditors, a country should normally allocate no more than 20 percent of its export revenues. Last year, the export of goods and services from Ukraine was around $62.2 billion. That means the maximum amount Ukraine could pay off shouldn't exceed $13 billion per year. Considering that the country is going through a civil war, Ukraine simply doesn't have that amount of money in its budget, Klymenko said.    

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