Pustovoitenko announces Ukraine will seek "debt forgiveness" from IMF (06/20/99)

Pustovoitenko announces Ukraine will seek "debt forgiveness" from IMF

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Ukraine's Prime Minister Valerii Pustovoitenko announced on June 15, while attending the Commonwealth of Independent States Economic Forum in St. Petersburg that he would ask the International Monetary Fund to forgive Ukraine its multi-billion dollar debt.

Finance ministers of the Group of Seven most-industrialized states, which to a large extent funds the IMF, agreed over the weekend of June 12-13 in Cologne, Germany, to forgive the debt of the 36 poorest countries of the world, in order to remove the crushing debt burden that many economic experts consider a hindrance to their economic growth.

Although the IMF and the G-7 have not yet specifically listed what countries will qualify for the debt forgiveness, Prime Minister Pustovoitenko jumped at the chance to have Ukraine included.

"The possibility of restructuring or writing off the debts of borrowers, especially the post-Soviet states, is being examined in the IMF's program of activities in the 21st century," noted Ukraine's prime minister, according to Interfax-Ukraine. "It would not be a bad thing, if Ukraine and Russia get such a restructuring for the whole of their lives."

Mr. Pustovoitenko met on June 16 with IMF Managing Director Michel Camdessus, who also was at the St. Petersburg economic forum, to discuss Ukraine's possibilities, but little was decided. Ukraine's ambassador to Russia, Volodymyr Fedorov, said after the meeting that there were concrete discussions on debt restructuring, but that more talks are needed.

Ukraine currently owes the IMF $2.64 billion and is in the midst of a $2.2 billion Extended Fund Facility (EEF) program, by which the IMF gives Ukraine tranches as it meets economic reform, restructuring and liberalization requirements. Ukraine has so far received about half of the EFF amount.

The country is facing especially large outlays in the coming months for short-term treasury bonds it issued in the 1996-1998 time period. It also has begun to repay the first IMF loans that it accepted several years ago.

The IMF representative office in Kyiv would not comment on Ukraine's chances of receiving credit discharge or on restructurization of its repayment schedule.

But World Bank economist Andrii Storozhuk said that it is very unlikely that the IMF would forgive Ukraine its debt. "I do not see that Ukraine has that sort of possibility," said Mr. Storozhuk, in an article in the newspaper Den. He said Ukraine's repayment problems are relatively short-term, and that after 2001, its loan payments will be relatively small.

The World Bank economist did not exclude that Ukraine may be able to reschedule its IMF debt so that the larger chunk of the money owed begins to be repaid after 2001. He also suggested that Ukraine could request additional credits to use directly to make scheduled payments, as the IMF is proposing for Russia.

Mr. Storozhuk explained that, compared to other countries, Ukraine's debt-to-GDP ratio is fairly low and that the World Bank, with whom the IMF works closely, classifies Ukraine as a country with a low amount of financial debt.

He said that the recent G-7 decision was aimed more at countries that were suffering the afteraffects of war and natural calamities, such as Somalia and Eritrea, and have been unable to maintain their repayment schedules.

Prime Minister Pustovoitenko traveled to St. Petersburg to take part in the third economic forum of the ministers of the Commonwealth of Independent States, which Russian officials were comparing to the annual meeting of Western economic leaders in Davos, Switzerland.

Speaking before the delegates as the chairman of the CIS Council of Heads of State, a position to which he was elected last month, Mr. Pustovoitenko continued to push for a wide open free-trade zone among the members of the CIS. He called for broad implementation of a barrier-free economic zone and for reducing the amount of waivers for such a zone. The legal basis for a CIS free-trade zone was created in April 1994 and was recently reinforced by another agreement signed during the last CIS summit in April, an effort led by Ukraine's President Leonid Kuchma.

In addition to the Ukraine's prime minister and Mr. Camdessus of the IMF, the St. Petersburg forum was attended by some 2,500 delegates, among them Russian Prime Minister Sergei Stepashin, United Nations Deputy Secretary General Yves Bertollo, members of the Parliamentary Assembly of the Council of Europe, the European Parliament and Peruvian Congress Speaker Ricardo Marcenaro.

The Ukrainian delegation also included Verkhovna Rada Chairman Oleksander Tkachenko, whose presentation to the delegates called for the economic integration of Russia, Ukraine and Belarus.

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