lunes, 31 de marzo de 2014

lunes, marzo 31, 2014

Windfall for hedge funds and Russian banks as IMF rescues Ukraine

Ukraine’s premier said his country was “on the edge of economic and financial bankruptcy”, but will comply with demands for drastic austerity

By Ambrose Evans-Pritchard

7:49PM GMT 27 Mar 2014


Ukraine has secured an emergency bail-out of up to $18bn (£10.9bn) from the International Monetary Fund to stave off imminent default but will see no debt relief and will be forced to slash spending amid dangerous civil conflict.

Critics say the package may be too small to stabilise the country as it spirals into depression with wafer-thin foreign reserves, and braces for a fuel shock as Russia’s Gazprom doubles the cost of energy in a move described by Washington as political harassment.

Arseny Yatseniuk, Ukraine’s premier, said his country was “on the edge of economic and financial bankruptcy”, yet vowed to comply with demands for drastic austerity including a 50pc rise in fuel priceseven if this proved a “kamikaze mission.

There will be no haircuts for creditors under the deal, unlike the EU-IMF formula in Greece and Cyprus. This amounts to a bail-out for Russian state banks and Western funds accused of propping up the previous regime and for vulture funds that bought Ukrainian debt cheaply for quick gain.

Tim Ash, from Standard Bank, said: “Ukraine has been the ultimate moral hazard play and it’s cavalier to expect taxpayers to cover this.”

Mr Ash said it has been obvious since 2011 that Ukraine was heading for the rocks, yet funds continued to snap up its bonds, betting that the country was “too big and geopolitically important to fail” and would always be bailed out in the end by Russia or the West.

Franklin Templeton, the global asset group, held $7.3bn of Ukrainian bonds at the end of 2013. Mark Mobius, the group’s chief, said last month: “Our belief is that Ukraine is in somewhat of a sweet spot... We believe they are going to keep friendly/good relations with Russia.”

Ashoka Mody, a former IMF negotiator, said the country screams out for debt relief, given external debt of 75pc of GDP and a collapse in exports. “It is truly staggering if they don’t push through debt restructuring, and the question is why not. I would go for very deep relief.”

The deal requires the backing of the IMF board in Washington, where Asian and Latin American members may balk at coddling creditors

Leaked transcripts of a board meeting of Greece’s rescue reveal mounting anger at the way the IMF has been used to bolster European banks. Sources close to the IMF say Ukraine’s public debt will peak at around 50pc at the end of this year, far below the danger level. “This is not high,” said one expert. “It would take a catastrophic shock to make it unsustainable.”

The IMF said the package will “unlockup to $27bn in international aid from all quarters over the next two years. Dmitri Petrov, from Nomura, said the tough terms risk stoking the political fires as clashes continue between Ukrainian nationalists and Russian-speakers. Former premier Yulia Tymoshenko has re-entered the fray with plans to run for the presidency days after she was caught in a leaked tape saying the 8m Russians in Ukrainemust be killed with nuclear weapons”.

The economic outlook is dire. The currency has crashed 30pc since Ukraine abandoned its fixed-peg in February. While this helps to regain competitiveness – an option denied to Greece in the euro – it makes it much harder for the government and companies to cover closely-bunched loan repayments on $145bn of dollar debt this year

The current account deficit has ballooned to 9pc of GDP. The IMF said the budget deficit will hit soon 10pc of GDP (with fuel subsidies) unless action is taken.

The government is already scrambling to comply with IMF demands to halt corruption in the state energy group Naftogaz. Investigators found 42kg of gold and $4.8m of cash at the home of former energy minister Eduard Stavytsky. They are investigating $4bn of alleged corruption by the old regime in the energy industry.

The country has failed to comply with the terms of two previous IMF rescues, reflexively playing off Russia against the West to gain maximum advantage. The circumstances are entirely different after Russia’s annexation of Ukraine and its seizure of the Ukrainian navy.

The new leadership has tied its fate intimately to the Western camp, signing an association agreement and military accord with the EU last week. The bridges with Russia have been burned

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