Arseniy Yatsenyuk said that the country cannot spend as much on debt servicing as on war. Goldman Sachs analysts believe that a default on Ukraine’s obligations may be declared as early as July

Prime Minister of Ukraine Arseniy Yatsenyuk (Photo: REUTERS 2015)

Ukraine is unable to continue servicing the debts accumulated over the past three years, Ukrainian Prime Minister Arseniy Yatsenyuk warned at a meeting with representatives of the American Chamber of Commerce and the European Business Association.

“Today we cannot afford to service the debts that were accumulated primarily over the past three years, when Ukraine received $40 billion. The total amount of funds required to service the country’s external debts is equal to our military expenses. We spend 5% of the gross domestic product on national security and defense, and we are forced to spend 5% on servicing the country’s external and internal debt,” concluded the head of the Ukrainian government.

Last week, Ukrainian Finance Minister Natalia Yaresko assured that the country would continue to service its debts. On June 22, Ukraine paid Russia $75 million for a bond coupon in the amount of $3 billion, which must be fully repaid in December 2015. However, Goldman Sachs experts believe that Ukraine may declare a default as early as July, having failed to fulfill its debt obligations to a group of Western investors.

the coupon, the payment of which is scheduled for July 24, and as a result will enter a state of default,” Goldman Sachs analyst Andrew Matheny outlined this scenario as a baseline in his report, reports Bloomberg “Ukraine will not pay . According to the expert, creditors are unlikely to support the debt restructuring plan proposed by the Ukrainian Ministry of Finance.

At the beginning of April 2015, the international rating agency Standard & Poors downgraded the long-term sovereign rating of Ukraine in foreign currency to the pre-default level - from CCC to CC with a negative outlook.

“The downgrade reflects our expectation that a default on the central government's foreign currency debt service is virtually certain,” S&P said in a statement.

According to the Ministry of Finance of Ukraine, at the end of May 2015, Ukraine's state and state-guaranteed debt amounted to $67.66 billion, including external debt - $43.518 billion. In May 2015, Ukraine's debt in foreign currency increased by 0.46%, or by $313. 34 million

Earlier, Yaresko said that the Committee of Creditors of Ukraine proposes to use $8 billion from the reserves of the National Bank of Ukraine to pay off its debts.

“Such a proposal is unacceptable for us and, most importantly, such a step would be illegal, which was confirmed by the IMF in its declaration a week ago,” Yaresko explained. The minister also recalled that the law recently adopted by the Verkhovna Rada gives the Ukrainian government the right to declare a moratorium on debt payments and, if creditors refuse to make concessions, the country’s authorities have “full moral and legal right to make an appropriate decision.”

Yatsenyuk also previously stated that the Cabinet of Ministers may exercise the right to declare a moratorium on debt payments.

“We want to pay, but we want to pay on the terms offered by the Ukrainian government and the Ukrainian state,” Yatsenyuk said, emphasizing that the Ukrainian authorities intend to do everything so that “our children, our grandchildren do not pay Viktor Yanukovych’s debts.”

Immediately after the adoption of the law, the Prime Minister called on creditors to listen to proposals for debt restructuring on Ukraine’s terms and to help the Ukrainian state “not with words, but with dollars, or rather, billions of dollars.” “The Ukrainian people will appreciate this,” Yatsenyuk emphasized.

In turn, the head of the Russian Ministry of Finance, Anton Siluanov, assessed the adoption of the moratorium law as an actual declaration of default, and Russian President Vladimir Putin announced the low level of professionalism and responsibility of the Ukrainian authorities and instructed Dmitry Medvedev and the Russian Ministry of Finance to clarify the intentions of their Ukrainian colleagues and take control of the situation.

Yatsenyuk announced the inability to pay Ukraine’s debts