By KYIV. Jan 18 (Interfax-Ukraine) – The options voiced from time to time for Ukraine to issue bonds secured by frozen Russian assets carry both legal risks and risks for the budget and the country’s rating, says Deputy Minister of Justice Iryna Mudra.
“It will be legally difficult to justify (the issuance of such bonds), because repayment of the debt will occur only after the transfer (to Ukraine) of Russia’s frozen assets or after the payment of reparations,” she said in a commentary to the Interfax-Ukraine agency.
“And the problem is not even in the source of debt repayment, but in its servicing: each issue of securities involves servicing and paying interest, but where will the money come from to pay them? The Ukrainian budget does not include an item for paying interest on additional external debt,” she added.
According to her, if you follow this path, you need to look for income to pay interest – this could be income from seized assets of the Russian Federation. The deputy minister recalled that the Belgian government should have considered providing Ukraine with part of such funds in the form of the Euroclear windfall tax depository, but there are still no results.
“Let’s assume that we receive approval from the European Union and record this in documents. Yes, we can do such an attraction and pay income on bonds from the income that is generated by the frozen assets of the Russian Federation. But if we are talking about paying income not from the frozen assets of Russia, but from the Ukrainian budget – this option is unacceptable, because there is no money for it,” the expert concluded.
Mudra also indicated that through this bond issue it would not be possible to raise the same amount as the amount of frozen assets. It is realistic to talk about 20-30% of $300 billion.
She added that it is worth remembering such an economic factor as sustainability, since issuing bonds and increasing debt without confiscating frozen assets and without paying reparations, but only with payments through the budget, will lead to a fall in the sovereign rating.
The official also clarified that the European Commission and the U.S. Department of the Treasury did not voice an official position on the advisability or possibility of issuing such financial instruments, so these are the opinions of politicians and other experts.
