September 01, 2003 |
|Ukraine is ready to repay its $1.8 billion debt to the International Monetary Fund ahead of schedule, its Central Bank said Friday, even though the nation faces a peak in foreign debt payments. |
The IMF reacted cautiously to the comments from central bank Chairman Serhiy Tyhypko and the government has not yet decided whether to bring forward the IMF repayments, which are currently scheduled through 2007.
"We have grounds to say that by the end of 2003 or start of 2004 we shall repay in full, with interest, our debt to the IMF of $1.8 billion," Tyhypko told a news conference.
"There was time to borrow but now it is time to repay the money and forget about debts. This will not be a surprise for IMF management. I have warned the IMF management of such a possibility during my last visit [to Washington]."
The IMF office in Kiev welcomed the move but said the government needed to pursue tight fiscal and monetary policies.
"This would be needed to protect Ukraine's reserve position, which is still not much above the minimum generally accepted for most countries and is facing substantial external debt payments in the coming months," it said in a statement.
"In this context, special attention would be needed to counter inflationary pressure that could be created with the accelerated pace of foreign exchange reserve accumulation."
Prime Minister Viktor Yanukovich was quoted by Interfax-Ukraine as saying it would be difficult for Ukraine to repay the debt earlier. The government has yet to make a final decision on whether to make the payments.
The government faces a foreign debt payment crunch in the next two years. The government is due to pay $1.64 billion to service its debts next year and $1.72 billion in 2005.
Analysts said Ukraine's financial stability was still rather fragile as the current economic recovery is mostly export-driven and the country is delaying vital structural reforms.
Tyhypko said IMF debt repayment would allow Ukraine to cut its total foreign debt to $8.9 billion. He said the debt will be paid from Central Bank reserves.
Total foreign currency reserves hit a record high of $6.870 billion on Aug. 29, up from $6.523 billion at the start of the month, Tyhypko said.
Tyhypko also said the government would continue talks with the IMF on a new $720 million loan program. Kiev has struggled to repair ties with the IMF since the Fund stopped lending two years ago due to slow reforms.
By Yuri Kulikov