Ukraine on the verge of default – BBC

The international rating agency Moody’s downgraded the credit rating of Ukraine to the pre-default level Ca. Ukrainian economy is on the verge of default and unlikely to be able to get out of the crisis without debt relief, experts state. In this case, the standard of living of ordinary citizens falling lower and lower, remaining far below the poverty line.

The international rating agency Moody’s downgraded the sovereign credit rating of Ukraine c Caa3 to Ca, the organization said. The rating outlook is negative.

The main reason for downgrade was “the likelihood that private external creditors could incur significant losses as a result of the government’s plans (Ukraine) to restructure most of its Eurobonds.” At the same time, as noted by the rating agency, “the level of public and external debt of Ukraine will remain very high, despite the reform plans and debt restructuring.”

According to the evaluation criteria Moody’s, the rating Ca means that the debt obligations of the issuer are highly speculative and are likely to be in default or close to default. However, there is a possibility of payment of principal and interest on it.

Below the level of Ca is only a step C, which means the onset of default on debts with low probability of repayment of principal and interest.

Earlier, in mid-February, the international rating agency Fitch also downgraded the rating of Ukraine foreign currency from CCC to CC, which according to the method Fitch is treated as a “high probability of default.”

Experts from Fitch believes that the $ 17.5 billion, which promises to the IMF, may not be enough to avoid a technical default.

The first tranche of aid fund of $ 5 billion went to the accounts of the National Bank of Ukraine on March 17.

For Ukraine, a technical default would mean elimination of external payments. Liberated state directs money to solve internal problems, but will only be able to withstand a sustainable business. However, now the Ukrainian government is trying to repeat the story in 1999, when the default is not recognized, but have restructured external loans. For these purposes, the cabinet ordered the Minister of Finance Natalia Yaresko conclude an agreement on the appointment of a financial advisor Lazard Frères SAS, the French division of the American Lazard Group. The company is the global coordinator of future debt operations of the public sector and has already started to create the registry to facilitate negotiations with the holders of Eurobonds on the restructuring of external debt. Cabinet intends to restructure all the papers, the payment of which occur in 2015-2018 years.

Even if the Ukrainian government and the official announcement will avoid default, the standard of living of ordinary citizens will be even worse, experts state. During the first two months of 2015 Ukrainian hryvnia exchange rate depreciated by 200%, as a whole over the last year UAH fell almost four times. After the events of February 5, when the National Bank refused to establish an indicative rate and cancel the daily currency auctions, the fall of the national currency has become uncontrollable.

As a result, the minimum wage in Ukraine to date has fallen to € 38 per month. This figure is three times lower than the UN definition of poverty of $ 5 a day.

At the same time, rising food prices and utility bills continue. Until the end of the year under an agreement with the IMF in Ukraine gas prices will rise by 280%, the heat – 66%, electricity – by 40%.