The spectre of default

Despite rising investor unease in Ukraine, the cabinet is in no hurry to adopt a credible budget

Ukraine insists it has the funds to avoid default, in the wake of a sharp downgrade by an international ratings agency and CDS spreads that suggest a 70% likelihood of default. Ukraine’s sovereign repayments this year are affordable, but the state could be landed with much-larger obligations from the private sector. Thus relations with the IMF are critical, but these have stumbled on a dispute over the 2009 budget, which rests on highly optimistic assumptions and still fails to deliver the promised zero-deficit. Evidently the government is unwilling to make further spending cuts, and prefers to cover the deficit with bilateral loans. The IMF’s attitude to this is uncertain. Adding to the sense of panic, Ukraine could in early March suffer sharp penalties for its failure to pay for Russian gas supplies.

Ukraine's president Viktor Yushchenko on February 25th dismissed the notion that Ukraine lacked the means to service its sovereign and private debts: “no doubt, these resources exist,” he said. Mr Yushchenko was responding to the decision earlier that day by the credit ratings agency Standard & Poor’s (S&P) to cut Ukraine’s main rating, its long-term foreign-currency rating, by two notches to CCC+, putting the country deeper into junk territory. S&P also maintained a negative outlook, indicating that further downgrades were possible. ...


[Source: The Economist: News analysis - Posted by FreeAutoBlogger]

1 comment:

Alex said...

Seven ways of stealing from budget

3. "Layer".
Nobody writes and talks about it, but such things happen. Some big state company ordered the equipment abroad. It was bought not at the manufacturer, but at a foreign firm that purchases the necessary equipment, and resells it gaining 10-20 %. But if you would call there you would hear Russian voice. And as the equipment - boring, costs over $1 billions you would tell, who the customer is. By the way, RosUkrEnergo is a kind of such pattern.