According to an article published in the Wall Street Journal of today:
"Ukraine faces and old style emerging market crisis, a currency pegged to the dollar,falling foreing exchange reserves, mounting debt-service needs and a potential standoff with the International Monetary Fund are familiar ingredients for emerging-markets veterans. Ukrainian dollar-denominated bond yields have hit 10%, but investors should remain wary.
It took full advantage of easy money conditions earlier this year, raising $2.25 billion from international markets. But times have changed. Ukraine's economy stagnated in 2012 and is now turning down again, and government promises of reform have fallen short. Last week, Moody's cut it's debt rating to Caa1 and threatened to downgrade it again, a decision that probably cuts Ukraine off from markets.
That leaves an uncomfortable position. The central bank's foreign-exchange reserves have fallen to $21.7 billion, covering less than three months of imports—a level the IMF regards as critical. Meanwhile, Ukraine faces foreign-debt service payments of $10.8 billion to the end of 2014, Moody's says. Ukraine has adopted unorthodox tactics, including borrowing short-term in dollars in the domestic market and raising a $750 million syndicated loan with help from Russia's Sberbank.
"Ukraine faces and old style emerging market crisis, a currency pegged to the dollar,falling foreing exchange reserves, mounting debt-service needs and a potential standoff with the International Monetary Fund are familiar ingredients for emerging-markets veterans. Ukrainian dollar-denominated bond yields have hit 10%, but investors should remain wary.
It took full advantage of easy money conditions earlier this year, raising $2.25 billion from international markets. But times have changed. Ukraine's economy stagnated in 2012 and is now turning down again, and government promises of reform have fallen short. Last week, Moody's cut it's debt rating to Caa1 and threatened to downgrade it again, a decision that probably cuts Ukraine off from markets.
That leaves an uncomfortable position. The central bank's foreign-exchange reserves have fallen to $21.7 billion, covering less than three months of imports—a level the IMF regards as critical. Meanwhile, Ukraine faces foreign-debt service payments of $10.8 billion to the end of 2014, Moody's says. Ukraine has adopted unorthodox tactics, including borrowing short-term in dollars in the domestic market and raising a $750 million syndicated loan with help from Russia's Sberbank.
The coming months are crucial. Ukraine is angling to sign a trade deal with the European Union. That might help with gaining support from the IMF, potentially boosting capital-markets access. But 2010's IMF package quickly went off the rails after the government backtracked on promises to raise gas and heating tariffs, which are heavily subsidized and politically sensitive. A deal with the EU could yet cause a backlash from Russia, which accounts for 30% of Ukraine's trade, according to Standard Bank.
Ukraine could yet face a currency crisis that would put it under severe pressure''.
