By Sujata Rao and Clare Kane
LONDON, April 19 Ukraine will not default on its
debt, the country's finance minister said on Thursday, adding
that the government would be able to meet all its funding
obligations in a year of heavy external refinancing needs.
Ukraine must repay over $5.3 billion in external debt this
year including $3 billion to the International Monetary Fund but
is effectively cut off from international capital markets as the
IMF has frozen its aid tranche to the ex-Soviet state.
But asked if there would be a default, Yury Kolobov told
reporters in London: "Of course not."
"We are not experiencing any problems with borrowing. At our
(bond) auctions we are seeing a lot of demand. Se we have a
choice and there is no basis to borrow urgently at any yield,"
he said on the sidelines of the annual Adam Smith conference.
"There are many options."
He did not say what the options were. The government has
said in the past it could try to raise cash on local bond
markets where high yields have attracted investors. One-year
hryvnia t-bills currently yield 20 percent while the Treasury
has also raised cash locally in dollars.
Kolobov earlier told the conference: "Speaking on a topic
which interests a lot of people, that is, funding, and speaking
as a state representative, I can confidently say we have no
worries. All those figures that we put in to the budget... we
will meet all our obligations without any problems."
Central bank board member Olena Scherbakova also assured
investors there would be no default, noting policymakers were
considering both internal and external debt markets.
"It is not a matter of paying or not paying. Repayment of
debt is important for the country's image. So certainly we will
have to find means," she said. "If there is a window to tap the
international markets, the country will go to international
markets. We are working both internally and externally."
But tapping global markets could prove tough unless the IMF
unfreezes its $15 billion aid programme to Ukraine.
This looks unlikely to happen soon as President Viktor
Yanukovich's party, preparing for October elections, has
launched $3 billion in extra spending and is refusing to meet
IMF demands to cut huge subsidies of prices of imported gas.
Ukraine's IMF resident representative, Max Alier, told the
conference that the fund was ready to support the country as
long as it complied with the IMF's demands, particularly in
relation to energy subsidies for households.
"Some progress has been achieved but in some areas we
believe are key the progress has not been as positive," Alier
said. "The energy and gas subsidies are imposing a very
significant burden on the budget. Reforms in this sector are