Facing default, Ukraine calls for more foreign funding | Business | Economy and finance news from a German perspective | DW | 11.12.2014

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Facing default, Ukraine calls for more foreign funding

Ukraine's leaders warn the country needs new loans to stave off bankruptcy. But the European Bank for Reconstruction and Development has said Kyiv must adopt economic reforms to qualify for more credit.

Ukrainian Prime Minister Arseny Yatsenyuk said on Thursday in Kyiv that Ukraine risks defaulting on its debt unless Western donors come up with billions of euros - or dollars - more in financial aid.

"In order to survive, in order to prevent a default, we need an international donor conference, the adoption of a Ukrainian recovery plan at this conference, and the help of our Western partners," Yatseniuk told parliament.

"Next year, in addition to the programme provided by the IMF - and we didn't say this, the Financial Times said this - $15 billion is needed," he added.

Yatsenyuk made the statement after a senior official for the European Bank for Reconstruction and Development (EBRD) said earlier on Thursday that international lenders would help Ukraine ride out its economic turmoil - provided the government pushed through economic reforms.

The EBRD official, Sevki Acuner, is the development bank's country head for Ukraine. In an interview with the Reuters news agency, he said the EBRD would need to see firmer proof that the troubled country's government is cracking down on corruption and implementing reforms before the bank would approve more loans.

"I think there is a consensus among all these parties [international lenders] that they will step up to the plate, on the condition of course that the Ukrainian government is performing," he said.

A year of revolution and war against pro-Russian separatists in the eastern Donbass region has pushed Ukraine's currency, the hryvnia, to record lows, and crippled an economy that was already near bankruptcy after decades of corruption and mismanagement.

IMF litany of austerity and privatization

Ukraine's parliament on Thursday approved the recently elected government's package of economic reforms, aimed at securing $27 billion (22 billion euros) in loans from Western backers, including the International Monetary Fund and the World Bank.

The reforms include overhauling the tax system, raising energy tariffs, and privatizing state firms. It also includes cuts to social benefits. Many Ukrainians face a winter of poverty, with prices rising sharply for imported goods, since the country's currency is expected to weaken further.

The main opposition party criticized the reforms, calling them an "austerity package," and saying it was too harsh.

"The programme was written under dictation from the IMF. It represents a path towards the impoverishment of our people," said Yury Boiko, head of the Opposition Bloc parliamentary group.

The reform package was in fact written with considerable input from Western advisors - in particular, from the new pro-Western Ukrainian government's US sponsors. Ukraine's new finance minister, investment banker Natalie Jaresko, is a former US State Department official who was granted Ukrainian citizenship only a few days ago.

President Petro Poroshenko and Prime Minister Yatseniuk were tipped for their current posts by the US government months before they were elected, as revealed by a leaked recording of a phone call between US Assistant Secretary of State Victoria Nuland and Geoffrey Pyatt, the US Ambassador to Ukraine that was posted online in early February 2014.

nz/uhe (Reuters)

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