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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

TALES OF FINANCIAL REVENGE. Ukrainian government laid a big egg on foreign loan markets

24 March, 1998 - 00:00

Serhiy Tyhypko, representative of the economic bloc in the government so much criticized by President Kuchma and Prime Minister, decided to explain Ukraine's foreign borrowing policy to the press.

It seemed that his explanations should have increased Ukraine's rating as a solid and trustworthy borrower. But instead everything went the usual way. Just think about his main statement, that Ukraine does not have unscheduled debts to Russia.

He probably had in mind debts for the uncontrolled usage of natural gas from pipelines flowing through Ukrainian territory to Europe. Experts say the Ukrhazprom will be responsible for paying this off, although it has already been having hard times dealing with the fallout from government mistakes. Unfortunately, there are no official documents defining how much and by whom the gas was consumed, so not many companies are likely to pay for it now. There is also a threat that the debt will be put on the state budget and converted from a monetary one to property, allowing Russia to be able to demand the most tasty tidbits of Ukrainian property.

Tyhypko announced also that he did not know anything about state guarantees for Ukrainian gas traders, granted in 1996-97, which also could not increase Ukraine's credit rating. Some time ago, ex-Premier Lazarenko also stated something of the kind, although now we know that he personally granted the warrants for these guarantees. To put it mildly, deceit has become a tradition in our quasi-professional, quasi-coalition government.

We are disappointed that our external bonds can only be placed abroad with very high interest rates. Tyhypko declared that Ukraine will enter this market only when we "will be able to be certain that we can decrease the cost of the granted loans." And here the minister makes a fine move in a bad game, stating according to Interfax-Ukraine that everyone in Europe is enthusiastic about our bonds and the market for them is still not saturated.

Commenting on this statement, the deputy head of the Calculation Chamber of Parliament Vitaly Melnychuk, noted that European attitudes to Ukrainian bonds is determined by Ukraine's low credit rating, which has raised the interest rates on the foreign bonds so high. B++ rating means that the investment risks are high in the country. Melnychuk noted, that Ukraine could have defended a better rating and lower interest rate but failed to do so.

Tyhypko, on behalf of the government seems to admit that they made a mistake and apparently hopes for a rematch, since the bonds can only be paid off after further installments. And only if they are less expensive.

In addition, Melnychuk noted the Ukrainian government does not want to avoid foreign debts entirely like, for example, Belgium, which refrains from foreign loans as a matter of principle. But it would be easier to feed our people the fairy tale about our bonds being in demand in Europe if someone could tell them just where that demand is.

 

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