Ukraine

Ukraine has warned debtholders including Russia that they should prepare to lose money as the war-ravaged country seeks to stave off a default, the Financial Times reported. Natalie Jaresko, Ukraine’s finance minister, made the comments to investors as Kiev seeks to restructure its government debt following a $17.5bn loan agreement with the International Monetary Fund. Ms Jaresko said the country’s debt operation, which targets more than $15bn of debt, “will probably involve a combination of maturity extensions, coupon reductions and principal reductions”.

The International Monetary Fund’s bailout of Ukraine is based on a fragile cease-fire holding between Kiev and Russia-backed separatists in the east, IMF officials said Thursday, The Wall Street Journal reported. The IMF’s assumption of a “non-intensification” of the conflict just a day after U.S. officials said militants had already violated the deal underscores the frailty of the bailout program.

The International Monetary Fund on Wednesday approved a bigger, high-risk bailout for Ukraine, giving Kiev immediate access to $5 billion of $17.5 billion in emergency IMF credit in another bid to keep the embattled country afloat, The Wall Street Journal reported. Ukraine’s deadly conflict with Russia-backed militants in eastern Ukraine forced the fund to revamp its bailout program as the turmoil pushed the economy into a deep, two-year contraction, fueled a currency free fall, sparked rampant inflation and drained the central bank’s reserves.

Ukraine pledged to remove heavy weapons from conflict-hit eastern areas as public finances ruined by the war made it necessary to start restructuring public debt, Bloomberg News reported. The truce agreed in Minsk last month has largely held, with some shelling by pro-Russian rebels still reported, Ukrainian military officials said Wednesday. Kiev City Council gave the government a mandate to restructure $550 million of its debt as the sovereign prepares to negotiate with bond holders alongside a $17.5 billion International Monetary Fund loan.

The central bank pushed lending rates even higher Tuesday in an attempt to stabilize Ukraine’s beleaguered currency and hold its financial system together until promised international loans arrive later this month, The Wall Street Journal reported. The move comes as the government hurried to complete painful overhauls—including raising energy prices and cutting pensions—to meet the terms of a deal with the International Monetary Fund. The IMF will decide next week whether to approve a $17.5-billion bailout to prop up the conflict-torn country’s finances.

It may go down as one of the least effective bail-outs the world has ever seen. Not Greece’s, but Ukraine’s, The Economist reported. Just two weeks ago Christine Lagarde, the head of the International Monetary Fund (IMF), promised Ukraine $40 billion over four years—an impressive-sounding sum for a country whose GDP may soon shrink to $70 billion. Since then, however, Ukraine’s economic crisis has got much worse. The currency has hit new lows: a dollar now buys around 30 hryvnia (see chart).

Ukraine’s economic woes deepened Wednesday as its central bank drastically limited access to foreign currency in an effort to halt the hryvnia’s free fall, and Russia threatened to halt natural-gas deliveries, The Wall Street Journal reported. The hryvnia’s decline has accelerated in recent days, in part because of delays in parliament on legislative measures needed to unlock financing from the International Monetary Fund, as well as continued fighting in eastern Ukraine with Russia-backed separatists.

Ukraine hopes to get as much as $10.8 billion from the International Monetary Fund in 2015 and save up to $15 billion over the next four years from a planned restructuring of its foreign debt, the crisis-hit country’s Finance Minister Natalie Jaresko said, The Wall Street Journal reported. Ukraine is dependent on international funding as its finances and economy have been hammered by a bloody, monthslong conflict with Moscow-backed militants in its industrial east. The IMF proposed last week a $17.5 billion four-year program to shore up Ukraine’s war-torn economy.

Ukraine’s $40 billion international bailout plan and cease-fire agreement are paving the way for the government to start debt restructuring talks with creditors, Bloomberg News reported. The International Monetary Fund-led package comprises of some $27 billion in aid from multinational lenders and foreign governments, as well as about $13 billion from Ukrainian“debt operations,” Finance Minister Natalie Jaresko said in an interview on Thursday.

Germany’s finance minister said on Tuesday that Ukraine should start negotiations with its creditors on how to restructure its debts as part of a wider plan to stabilize the conflict-ridden country, The Wall Street Journal reported. Efforts by the international community, including the International Monetary Fund, to secure Ukraine’s financial needs “are linked to Ukraine also making efforts to talk to its creditors about an extension of maturities, so a kind of debt restructuring,” Wolfgang Schäuble said following talks with his European Union counterparts.