Ukraine May Avoid Debt Restructuring, Central Bank Official Says

Ukraine isn’t planning to restructure its debt and is working with the International Monetary Fund on a “sustainable program” to fight a recession and sinking foreign reserves, the nation’s acting deputy central bank head said.

“We are a good a borrower and we want to follow the credit history of Ukraine and therefore this discussion on restructuring is not on the table now,” Vladyslav Rashkovan said Tuesday in an interview in Vienna. Debt restructuring is “absolutely,” he said.

Ukraine is grappling with sagging reserves and the worst economic contraction since 2009 after nine months of battling pro-Russian insurgents in the easternmost Donetsk and Luhansk regions. The unrest left the hryvnia down 48 percent against the dollar last year and prompted the government to seek financial help on the top of a $17 billion loan from the IMF.

The government is seeking to unlock the next tranche of the IMF loan, with a mission from the Washington-based lender in Kiev since Jan. 8. Talks with the fund are “very difficult,” Finance Minister Natalie Jaresko said Jan. 18.

“We expect there will be a positive decision” from the IMF’s board in February, Rashkovan said.

Ukraine’s dollar-denominated bonds due 2017 extended their decline, falling 2.5 cents to a record 56.9 cents on the dollar, data compiled by Bloomberg show.

Goldman Sachs Group Inc. said a Ukrainian debt writedown may erase 70 percent of its bonds’ value, while Barclays Plc said Ukrainian restructuring is probably “unavoidable.”

While “the risk of general default has increased,” international lenders will probably prevent that scenario, Eurasia Group analysts led by Alex Brideau said in a Jan. 14 report.

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