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Moscow expects Kiev to pay for natural gas from IMF aid — Russian representative to IMF

April 08, 2015, 13:20 UTC+3 WASHINGTON
IMF executive director for Russia told TASS that Russia is not interested in the collapse of Ukraine’s economy
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WASHINGTON, April 8. /TASS/. Russia is not interested in the collapse of Ukraine’s economy and expects Kiev to pay for natural gas from the funds that were granted by the international community, Alexey Mozhin, IMF executive director for Russia told TASS.

"I don’t think that the Ukrainian economy’s collapse would be in the interests of Russia - simply because of pure pragmatic and even selfish reasons. For example, we are expecting Ukraine to pay for the Russian natural gas supplies all the time", Mozhin said.

"From what funds could Ukraine redeem the biggest part of its debt to Gazprom and to make prepayments for the current gas supplies? Obviously, from the funds granted by the international community", he added.

IMF’s aid program for Ukraine has many risks

Mozhin said the bailout program for Ukraine developed by the International Monetary Fund (IMF) has many risks and will considerably depend on private investors’ readiness for debt restructuring and exchange rate dynamics.

Under an agreement with the IMF, which has already provided $17.5 billion in loans to Ukraine, Kiev has to restructure $15.3 billion of its debts to private investors.

"This means that the financing of this program and its implementation will considerably depend on the benevolence of private creditors," Mozhin said.

Ukraine has to reach agreement with private investors before the IMF’s first review of the program fulfillment, i.e. by the second half of June. Relative to the borrower’s gross domestic product, the IMF’s loan to Ukraine is the largest in the Fund’s entire history, he said.

"To my mind, this is the program that Ukraine needs. At the same time, I share the common opinion of the Fund’s management and members of its board of directors that it has many risks and it will be uneasy to fulfill it. The country [Ukraine] cannot endlessly live beyond its means and will have to go through radical belt tightening," Mozhin said.

The fulfillment of the IMF’s bailout program for Ukraine also strongly depends on exchange rate dynamics because the aim of achieving the debt to GDP ratio of no more than 70% is one of the program’s goals, Russia’s IMF envoy said.

"But in the current and next year, Ukraine will quickly build up its debt, receiving loans from the IMF and other creditors while the debt to GDP ratio will depend on the hryvnia exchange rate," Mozhin said, adding the exchange rate of the Ukrainian currency also influenced the internal prices of gas and heating.

The IMF’s aid program for Ukraine is based on the hryvnia’s stabilization at 21.5-22.5 hryvnias to the US dollar whereas the Ukrainian currency has already been seen to plummet to below 30 hryvnias to the greenback, Russia’s IMF envoy said.

With the hryvnia exchange rate at 21.5 hryvnias to the dollar, Ukraine’s state debt will rise to 94% of its GDP, he said.

"We have large doubts about the realisticity of some aspects of this program," Mozhin said.

The IMF and the World Bank will gather for their spring session in Washington on April 17. Financial assistance to Ukraine will top the agenda of discussions. Russia will be represented by Finance Minister Anton Siluanov at the IMF-World Bank spring session.

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