AFTER months of talks, markets are expecting an announcement soon about the resolution of Ukraine's debt crisis. On August 24th news leaked that Ukraine and its creditors had agreed to a 20% haircut on $19 billion-worth of debt (the rumours have not been confirmed). If true, is this good news for Ukraine?
For months, Ukraine’s creditors, which include Franklin Templeton, a global investment firm that owns about $9 billion of the country’s bonds, and BTG Pactual, a Brazilian rival, refused to consider writing off any Ukrainian debt. More recently, traders have reckoned that a 10-15% haircut was most likely. So to get to 20% looks like a win for the Ukrainians.
However, in a crucial way Ukraine could lose out. As part of a four-year, $17.5 billion bail-out agreed to in March, the IMF set out three important conditions. In return for the money, it assumes that: first, Ukraine will reduce debt repayments in any given year to no more than 10% of GDP by 2019-25; second, that the government in Kiev will write off $15.3 billion in debt and interest by 2018; and third, that it will have reduced its public-debt-to-GDP ratio to about 70%...Continue reading
Source :Business and finance http://ift.tt/1WPCRxF
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