In response to Jonathan Wheatley’s article “IMF chief warns against complacency in recovery” (December 3), I would like to point out that Ukraine is looking for another way to solve the debt problem, and this may be a mistake.
With IMF loans on hold and the bleak economic outlook ahead, Ukraine is about to take an exceptionally risky step: tapping the capital markets for a big debt issue.
Prime Minister Denys Shmyhal said on December 2 that the government plans to raise about $3 billion this month, including $1 billion through Eurobonds and $2 billion through the issuance of national treasury bills. .
The idea is to use the proceeds as a short-term “bridge loan” that would buy the government time until the IMF – presumably soon – resumes lending to the country. But this is a very bold assumption. In fact, if 2020 has taught us a lesson, it’s that if anything can go wrong, it probably will.
Ukraine’s economy was crippled by the coronavirus pandemic in the first and second quarters, but these problems will easily be overshadowed by the rise of the second wave of the pandemic.
But Covid-19 and its economic impact are only part of the problem. The second is the lack of investor confidence in the will of Ukrainian policymakers to deal with the crisis by fighting corruption and relaunching reforms.
Merrill Lynch, JPMorgan, Citi and Morgan Stanley, the country’s top debt buyers last year, all either reduced their exposure or completely liquidated their positions, citing rising political risk. And that brings us to the main point because Ukraine has to pay about $5 billion in foreign and domestic debt due in the first half of 2021. It is implausible to imagine that the government will be able to pay the debts without the support of the IMF, which is currently not here.
Now add the $3 billion in a three- to six-month document the government plans to release in December, and you get a true picture of the potential “debt tsunami” Ukraine will face by June 2021. .
Serhiy Verlanov
Former Head of the National Tax Service of Ukraine, Lviv, Ukraine
