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 If talks with creditors fail, Ukraine could default this Friday, - Financial Times

Experts forecast possible default of Ukraine this Friday. They believe Kyiv still could succeed in creditors' talks, but after the default.

Ukraine has extended hastily assembled talks with creditors amid predictions that the country could default as early as Friday if an agreement is not reached. This is reported by Financial Times' Elaine Moore, quoted by Censor.NET.

Kyiv's desire to avoid the fate of Greece has encouraged both sides to tone down the combative rhetoric that has dogged negotiations over the past three months. However a principal-to-principal meeting held in Washington last week failed to elicit a deal to restructure Ukraine's $70bn debt burden, although a joint statement declared that progress had been made.

Watch more: Ukraine still hopes for Putin's loan of $3 billion to be restructured, - Finance Minister Jaresko. VIDEO

Following Russia's annexation of Ukraine's Crimean region and the conflict with pro-Russian separatists in the east that has wrecked its economy, Ukraine's debt is widely expected to top 100 per cent of GDP this year. Kyiv hopes for a 40 per cent debt writedown on bonds worth a little more than $15bn in order to make the debt sustainable. But a group of four creditors holding around $9bn of Ukrainian bonds, led by U.S. asset manager Franklin Templeton, disagree that a haircut is needed and have put forward an alternative proposal for maturity extensions and coupon reductions. The only concrete example of progress so far has been the suggestion of swapping part of Ukraine's debt for GDP-linked bonds, which both sides support, and which would offer equity-like returns if the country's economy outperforms.

So far, Ukraine has met all of its debt obligations, including a $75m coupon payment to Russia, and has successfully negotiated maturity extensions on a number of other payments. However, Goldman Sachs has warned that default looks "likely" in July when a payment of $120m comes due on a Ukrainian government bond.

Vadim Khramov, an analyst at Bank of America Merrill Lynch, cautions that things are still likely to get worse in Ukraine before they get better. "A last-minute deal in September remains a likely possibility," he wrote. "However, the consensus is that risks of a moratorium and hard default have been increasing."

Read more: There is visible progress in negotiations on restructuring of Ukraine's external debt, - Finance Ministry

The International Monetary Fund has stated that it will stand by its bailout of Ukraine even if the country fails to reach an agreement on restructuring its private debt and Kyiv is now waiting for the outcome of a review before it receives the next tranche of IMF funding.

Kyiv was bailed out by the IMF last year in the wake of the removal of former president Viktor Yanukovych from office and received a fresh pledge this year as conflict with Russian-backed separatists in Ukraine's eastern districts worsened.




 
 
 
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