Ceasefire and IMF Aid Reduce Not Eliminate Ukraine Default Risk

A tentative cease-fire and multibillion-dollar IMF aid package buys Ukraine time to stabilize its battered, war-torn economy.

But with high reconstruction costs and a long list of badly needed reforms, the risk of a government bond default remains high.

After more than a year of armed conflict, Ukraine has also seen its currency and economy contract sharply. Inflation is soaring, and business and consumer confidence have plummeted, according to a recent survey by the National Bank of Ukraine.

The collapse in Ukraine’s hard currency reserves has left the government with little cash to cover imports, especially critical shipments of Russian natural gas.

To keep the government afloat, the International Monetary Fund on Thursday announced a $17.5 billion aid payment. Kiev needs roughly that much just to pay this year’s debt obligations and cover the cost of imported natural gas, according to Bank of America Merrill Lynch estimates.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza