The Greek PSI restructuring is giving some indebted nations an idea. Debt restructuring is very doable. Debt holders? That’s OK, they will be back. Plus who needs them anyway when you have the IMF, which is easier to push around. One nation that is thinking about taking this route is Ukraine.
Bloomberg: Ukraine invoked Greece’s record debt restructuring in a bid to stave off repaying $3 billion to the International Monetary Fund as Standard and Poor’s warned of funding risks and cut the country’s rating outlook to negative.
First Deputy Economy Minister Vadym Kopylov cited last week’s “huge” deal between Greece and holders of its bonds, saying Ukraine may seek a 10-year delay in repaying the IMF under a $16.4 billion rescue program granted in 2008. The lender said it hasn’t been asked to reschedule payments
Recently the Ukrainian government decided to increase spending on social programs by at least 1.2% of GDP above what was targeted in the budget as part of the original IMF financing. This is how politicians get reelected (not much different than in the US).
A couple of weeks ago Prime Minister Azarov also said that Ukraine should receive new IMF financing – just because… The new funds would be used to pay interest on the 2008 loan. Of course the IMF didn’t go for that proposal.
A nice case study on moral hazard..