Ukraine Corruption Makes Any Debt Deal Impossible To Work

Leonid Bershidsky, Bloomberg: Ukraine Is Too Corrupt for Debt Deal to Work

Ukraine is reportedly close to a deal with its private creditors, who may accept a 20 percent haircut. This is an uneasy compromise that would solve little, because the government continues to fail where it really matters: cutting corruption and bringing the country's huge shadow economy into the tax system.

Ukraine's private creditors, led by asset manager Franklin Templeton, are talking with U.S.-born Finance Minister Natalie Jaresko about restructuring $19 billion of debt. Ukraine's $17.5 billion bailout agreement with the International Monetary Fund requires a deal that would save the government $15 billion over four years through 2018, bring its debt-to-gross-domestic-product ratio below 71 percent by 2020 and keep its gross financing needs to an average of 10 percent of GDP through 2025. The creditors initially told Jaresko that an immediate haircut wouldn't be necessary to meet these conditions: rescheduling and coupon reductions would be enough. The minister, however, demanded a 40 percent haircut and threatened a moratorium on debt repayments otherwise.

WNU Editor: I can spend the entire night discussing the problem of corruption in Ukraine. My family, friends, and associates in Ukraine are always telling me the same thing when it comes to this issue .... if you have money outside (of Ukraine), you have to be completely insane to bring money into Ukraine. Alas .... it appears that this is exactly what Western creditors are now about to do.