Russian Conflict Ukraine Finance Minister: Bankruptcy 'Not an Option'

Natalie Jaresko talked to Handelsblatt about Ukraine's debt restructuring and how she wants to get the economy back on track.
The Ukrainian Finance Minister Natalie Jaresko has to save the Ukraine from bankruptcy.

Minister Jaresko, the Ukraine will receive billions of dollars in aid from the IMF if its international creditors agree to a debt restructuring. But they haven't – does that mean the country is threatened by bankruptcy?

A state bankruptcy is not an option. We have possibilities to negotiate. This week we will sign an €1.8 billion agreement in Riga with the E.U. The U.S. gave us a credit guarantee of a billion dollars for a new euro bond which we will issue in the coming weeks.

But owners of Ukrainian bonds in London are refusing to restructure the debt and they're accusing you of not making enough offers.

The negotiations are very difficult and more complicated than we first thought. We still don't know exactly who the debtors are. This is causing delays because we need to know who the creditors are – it's important in international practice and also for political reasons. We're in daily contact with the debt restructuring consultants – Lazard for us and Blackstone for the creditors – are in daily contact.

What are the main points of discussion?

We have to save $15.3 billion over four years. That would be possible with an extension of the loan payback period. We need to achieve a maximum of 71 percent of GDP by 2020 and financing the debt is not supposed to eat up more than 10 percent of the GDP.

How will that affect the creditors?

We will need a combination of an extension and haircuts in the credit sum and interest coupons. But so far, we've only discussed an extension. But we have to move forward fast now and negotiate openly. Investors need to know that we don’t have a lot of time.

The IMF wants a decision by June?

Yes, the IMF wants an agreement about the payout of a second credit tranche by June.

Is it possible to have an IMF program without creditors’ participation?

You need to ask the IMF that question. But German taxpayers, who are financially supporting us via the E.U. and national aid programs, have the right to expect private creditors to take part of the costs by debt restructuring. This is part of the program: $17.5 billion from the IMF, $7.5 billion from national or multinational creditors such as the U.S. or the E.U. and $15.3 billion from private creditors. But it is about more than that.

What is it about?

My country needs to be given the chance to recover economically. For that, we have to limit the pressure on the budget and create growth.


How would that be possible?

The free trade agreement with the European Union gives Ukraine access to the European market. Because of the currency devaluation, we're more competitive than ever. We're now really attractive for German companies involved in manufacturing.

They're concerned about the war in the eastern part of Ukraine.

The war is far away from their factories in West Ukraine. The companies based there from abroad haven't ever had any supply interruptions. The first thing I'm going to do is talk to Leoni and other car suppliers. Suppliers based here can and must become success stories for Ukraine and the German economy. We went through thick and thin together and now they should make full use of the current opportunities.

A new advisory group for Ukraine has been set up, including the oligarch Dmitro Firtasch and former German Finance Minister Peer Steinbrück. Do you need them as advisers?

No, we haven't even been in touch yet. We have more than 100 advisers from all over the world, including from the European Union and the German finance minister. We don’t need more advisers.

What reforms are you going to take on now?

Between now and summer, I will fully revise the tax system. I'm not talking about new tax rates but about simplifying the system. We will create the same conditions for everybody. We will eliminate tax exemptions for iron ore mining for example, to eliminate corruption. That's also why I don’t have months to negotiate about debt restructuring.

The economy is in free fall. How do you plan to manage all this?

In the first quarter, GDP fell by 15 percent. We think that that trend will stop in the second half of the year, the situation will stabilize and that we will have two percent growth in 2016. The IMF and European Bank for Restructuring and Development are also saying the same thing. 

Ukraine won't be another Greece?

We've worked on a plan with the European Union, which also helped Poland to get on the right track in the past. We know there are no alternatives other than to introduce radical reforms and to commit to Europe.


Handelsblatt's international correspondent Matthias Brüggmann met Ms. Jaresko in Tiblisi, Georgia. To contact the author: [email protected]