At its meeting held on April 4, the Cabinet of Ministers of Ukraine, upon the proposal of the Ministry of Finance, adopted the ordinance that outlines the threshold of debt relief within the IMF’s bail-out program adopted on March11, according to the press-office of the Ministry of Finance.
The Cabinet of Ministers of Ukraine has approved a list of external debt obligations in relation to which it is planned to conclude deals to change the terms and conditions of borrowing; it has issued instructions that can help involved parties to perform restructuring.
The deals stipulating changes in the terms of borrowing should ensure implementation of three quantitative commitments to the IMF to reach particular debt indicators, namely:
(і) to save money on international payments covering government debt, guaranteed by the state, and that of economic entities in the public sector, in the amount of around 15 billion dollars, for the period of implementation of the IMF program;
(ii) to ensure that public debt / GDP ratio is to be not more than 71% of GDP until 2020;
(iii) to ensure that total funding concerning debt, on average, is to be 10% of GDP (up to 12% of GDP per year) in 2019-2025;
In order to achieve these three objectives, the deals about changes in terms and conditions of borrowing should include total public sector external debt that arose before February 28, 2014, and representing:
1. government external debt
2. external debt guaranteed by the government
3. “quasi-sovereign” external debt, including eurobonds of the state-owned banks, Ukrzaliznytsia, Kyiv city.
The deals as regards each financial instrument listed should contribute to accomplishment of three tasks for debt repayment. Simultaneously, taking into account the significant role Ukreximbank and Oschadbank play in the banking system and economic renovation of Ukraine, the deals concluded to enter changes in the terms and conditions of borrowing, i.e. external obligations, are aimed to accomplish the goals of the IMF’s liquidity program. (purpose 1).
Under the IMF’s program, negotiations with creditors will be completed by the first viewing of this program (in May 2015).
A full list of securities being the subject of the agreements for changes in conditions of borrowing is an annex to the ordinance of the Cabinet of Ministers, and will be made available on the website of the Cabinet of Ministers of Ukraine in the near future.
