What the bankers fear to say aloud has happened. The government and NBU have made Ukrainian commercial banks exchange domestic bonds of 1997-98 for converted domestic bonds of the second issue totaling Hr 2.2 billion with 3-3.5 years maturity.
All domestic bonds in the possession of Ukrainian commercial banks, including mortgaged and blocked ones to form a reserve to compensate individual depositors, are to be exchanged. This means “the Ministry of Finance refuses to execute its financial obligations to the banks, which purchased bonds from it. The words, that it will be executed some time later, and according to different rules, are only a screen for inappropriate actions,” People’s Deputy and Chairman of the Board of Praveks Bank Leonid Chernovetsky told The Day. The major part of Ukrainian banks are unanimous that now when all banks came to depend on the NBU, the situation at the interbank market will worsen, which may cause NBU to refuse them refinancing under the converted domestic bonds.
As for foreigners, our polite government invited (according to the Cabinet of Ministers) 20 non-residents who are major domestic bondholders to come to Ukraine “to discuss domestic bonds conversion.” The Prime Minister practiced his greeting speech last Monday at the meeting with oblast administration heads, and it will not be anything new: despite receiving loans from international financial organizations and conversion of the domestic bonds in possession of Ukrainian banks, the financial situation in the country “remains very complex.” According to Pustovoitenko, both domestic and foreign debt interest is paid from the state budget and Hr 150 million were spent last month to pay off domestic bonds. But the main problems seem to lie ahead - the IMF has not yet officially responded to the Ukrainian restructuring of its foreign and domestic bonds.






