Ukraine Fails to Seal Bailout After 2nd IMF Visit of 2013
Ukraine failed to agree on a bailout from the International Monetary Fund after the lender’s representatives visited the recession-hit former Soviet republic for the second time this year.
The fund and the government will to continue discussing Ukraine’s request for about $15 billion in aid, its third rescue in four years, according to an e-mailed statement today.
“The mission made good progress in discussing these issues, and our dialog will continue in the coming weeks,” Christopher Jarvis, the Washington-based mission chief, said in the statement. “The key building blocks of a new program would be measures to reduce Ukraine’s fiscal and external current- account deficits, and energy sector and banking reforms, in order to create the conditions for sustained economic growth and job creation in Ukraine.”
Ukraine’s economy fell into recession in July as global prices for exports such as steel plunged. The eastern European nation’s junk credit rating was downgraded in December by Standard & Poor’s and Moody’s Investors Service, which cited foreign financing requirements. The government has said it can survive without the IMF as it’s retained access to foreign debt markets, selling $1 billion of Eurobonds in February and an additional $1.25 billion yesterday.
Ukraine’s hryvnia, which has lost 1.06 percent against the dollar this year, strengthened to 8.1360 as of 12 p.m. in the capital, Kiev, from 8.1370 yesterday, data compiled by Bloomberg show. The yield on government bonds due 2022 rose to 7.286 percent, the highest level since April 3.
The cost to insure the country’s debt against non-payment for five years using credit-default swaps rose to 562.500 basis points from 561.7 yesterday.
As a condition of aid, the IMF wants Ukraine to trim heating subsidies to narrow its budget deficit. President Viktor Yanukovych, who faces re-election in 2015, refuses, saying people can’t afford to pay higher prices.
Ukraine’s economy contracted 0.8 percent in the fourth quarter from the previous three months after a 1.5 percent decline in the July-September period, confirming the country’s second recession in four years. Industrial production slumped 4.8 percent from a year earlier in the first two months as metals and chemical-product demand sank.
S&P cut Ukraine’s rating one level to B, five steps below investment grade in December, while Moody’s lowered it to B3, six levels below investment status.
Central bank reserves fell to $24.7 at the end of March from $38.2 billion in August 2011 as the central bank spent foreign currency to keep the hryvnia stable. The current-account gap widened to a record 8.4 percent of gross domestic product last year.