From the Telegraph:
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 prices – even 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.”...MORE
