Ukrainian Bonds Plummet as Government Unity Efforts Stumble
Ukrainian government bonds plunged as efforts faltered to shore up the ruling coalition after a key reformer quit and accused presidential party members of corruption.
Notes issued in November following a $15 billion restructuring are poised for their worst week in the wake of comments from the parliament speaker that Ukraine is entering a “serious political crisis.” While President Petro Poroshenko is seeking to rally members of the pro-European administration and plans personnel changes this month to ease tensions, the Samopomich coalition party Friday demanded the entire cabinet be fired.
Ukraine’s government, which swept to power in 2014 after pro-European street protests opposing years of corruption, has seen its ratings plummet over delays in reforms. The latest storm was triggered by the resignation of Economy Minister Aivaras Abromavicius, who said presidential allies want to block overhauls of the ex-Soviet republic’s institutions. The U.S., which has made billions of dollars in aid contingent on progress to reshape the economy, expressed its disappointment at Abromavicius’s exit.
“The coalition is likely to fall apart this year, though not immediately,” Eurasia Group analyst Alex Brideau said in an e-mailed note. Poroshenko “likely prefers maintaining the status quo for the moment. Prime Minister Arseniy Yatsenyuk will probably stay on to lead a reshuffled cabinet. But any move to address the problem in the coming weeks will only temporarily ease the situation.”
‘Another Restructuring’
The political turmoil threatens to jeopardize a $17.5 billion International Monetary Fund rescue loan and is causing investors to increase bets that Ukraine may have to return to the negotiating table with its creditors. The yield on bonds due September 2019 jumped 27 basis points to a near-record 10.22 percent by 4:33 p.m. in Kiev, bringing the weekly increase to 85 basis points.
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http://www.bloomberg.com/news/articles/2016-02-05/ukrainian-bonds-plummet-as-government-unity-efforts-stumble
