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Bloomberg/Tbilisi, Georgia

Ukraine’s finance minister urged the country’s creditors to demonstrate urgency in debt-restructuring talks, warning that “all options are on the table” if there’s no progress as the negotiations approach next month’s deadline.
“The creditors need to take very seriously the situation, the time sensitivity, the principles of transparency, good faith and responsiveness,” Natalie Jaresko said in an interview Friday during the annual meeting of the European Bank for Reconstruction and Development in Tbilisi, Georgia. “We need to move quickly.”
Ukraine is seeking new terms on $23bn of its bonds to meet the objectives of an International Monetary Fund lifeline after a yearlong conflict in its eastern regions hammered the economy and left foreign-currency reserves languishing near record lows. The government and a creditor group led by Franklin Templeton this week accused each other of stalling negotiations.
“There are more disagreements than agreements over the future steps,” Vladimir Miklashevsky, a strategist at Danske Bank in Helsinki, said by e-mail. “To me, the equation looks unsustainable.”
Ukraine’s dollar-denominated bond maturing July 2017 fell 0.2 cent to 46.48 cents, extending its declines this week to 1.4 cents, the most since the week ending March 20.
“We need to talk face to face” in the very near future, Jaresko said in a video published by the EBRD on Friday. “Nothing has changed” in Ukraine’s objectives for the negotiations and there has been “no pause” in contact between advisers for the two sides, she said in the interview.
The government in Kyiv hasn’t yet heard back from Russia, which holds $3bn of Ukrainian Eurobonds, Jaresko said. Ukraine is “current on all of its obligations as of today,” she told reporters later, answering a question whether Ukraine will pay the coupon on its Russian bond on June 20. “The future is future,” she said.
“We have informed all the bondholders through the clearing system,” Jaresko said in the interview. “There are three custodians in Russia, through the custodians we expect to hear back from the official holders of the debt. We have not heard back through the clearing system from the official holders of the debt.”
The government “asks and insists” that creditors acknowledge Ukraine’s current situation and accept its proposals on the procedure and terms of debt restructuring, Prime Minister Arseniy Yatsenyuk told lawmakers in Kyiv Friday. The cabinet is “very firm in its position that talks on debt restructuring need to be completed.”
The Ukrainian hryvnia, the world’s worst-performing currency last year, has “moved back to a stable level,” Jaresko said.
The hryvnia has lost 25% to the dollar this year, more than any other currency except the Azeri manat, after a 48% plunge in 2014. In the past three months, however, the hryvnia has gained 25%, the best performance globally behind the Russian ruble.
“Hopefully it will remain stable,” Jaresko said. “One quarter is too little for us to see a trend, we need at least half a year to see what the trend is.”
Ukraine is seeking as much as €1.2bn ($1.4bn) from the EBRD in 2015, on par with last year, Jaresko said. In 2014, the country was the second-largest recipient of the development bank’s financing behind Turkey.
The Finance Ministry won’t amend the budget after the central bank revised its forecast for this year’s economic contraction to 7.5%, compared with the spending plan’s assumption of 5.5%, Jaresko said.
Gross domestic product shrank 17.6% in the first quarter from a year earlier, the most since 2009, the state statistics office said Thursday. That compares with a 13.5% median estimate by seven economists in a Bloomberg survey.
The decline is slowing this quarter and will decelerate further in July-August, in part because of the base effect from last year’s drop, Jaresko said.