Ukraine's Victor Yanukovych, opposition leader who won Sunday's presidential election, said Ukraine needed financial help from both the East and the West and should renegotiate its debts. In his first policy statement since the vote, Yanukovych called on his election rival Prime Minister Yulia Tymoshenko to quit so he could start forming a new government and said ties with Russia and other former Soviet states would be a priority.
Ukraine’s economy is one of Europe’s worst performing in the past year — contracting by up to 15 percent — and investors have feared that the country could default on debt payments.
"We need help from the West and the East in stabilising the economic situation and restructuring financial obligations," he said in a statement.
Inside Ukraine, the hryvnia currency and stocks traded flat after Yanukovych’s statement — as they have broadly been since Sunday’s election. Dealers have said political uncertainty in the election aftermath had been priced in.
But Ukrainian sovereign bond yields jumped — the 2016 global bond price fell 0.875 to 80.000 to give a yield of 10.821 percent, a significant rise of 21.7 basis points.
The 2013 global bond fell 0.375 points to 90.375 to yield 11.192 percent, a 15.6 basis point rise.
Five-year credit default swaps, instruments used to insure against a Ukrainian default, fell 30 basis points to 956.8 against 982.3.
WHICH DEBT?
Yanukovych ordered a new government to "go to our creditors, our neighbours, economically developed countries with the aim to reach agreements and direct help to solve the economic crisis". He did not say which obligations he meant. Some of the payments that have been difficult for Ukraine in the past year have been sovereign and quasi-sovereign Eurobonds, domestic T-bills and payments for Russian gas.
Yanukovych also made no direct reference to the International Monetary Fund, which suspended a $16.4 billion bailout programme at the end of last year but whose aid had been vital in propping up the state’s finances in 2009.
"He said that Ukraine needs help from the East and the West, and to restructure the debt. But … he does not mean it needs to restructure sovereign debt," said Alexander Morozov, chief economist Russia and CIS at HSBC in Moscow.
"The main problem at the moment is the debt of the corporate and banking sector, so I would interpret his words in this way."
Alexei Moisseev of Renaissance Capital in Moscow said it was unclear what debt was meant and noted Ukraine’s foreign debt repayment schedule this year — it has just a 35.1 billion yen ($392 million) bond to repay in December — was relatively modest.
"Unlike Argentina, debt repayments are not the big stone around the neck of Ukraine’s budget. Their big stone is social spending," he said.
