George Soros Justifies why Ukraine Needs Debt Relief

Billionaire and accomplished businessperson, George Soros is well-known for his philanthropic spirit and contributions to the betterment of society. George Soros does his through his Open Society Foundation. Apart from such actions, Soros is one man who is never afraid of airing his opinion. In recent times, he has remained highly vocal regarding Ukraine’s recovery. Most importantly, he has served a huge role in seeking assistance for Ukraine from various parties such as the European Union. As such, George Soros Ukraine penned down an article on The Wall Street Journal in an attempt to seek support for Ukraine in its endeavors to get its economy back on its feet.

According to George Soros, Ukraine has been striving to come up with a suitable deal with its creditors. This effort has been a move to meet the condition laid down by the International Monetary Fund in a bid to receive more financial support. Worst case scenario, the Russian aggression has affected the new Ukraine’s economy negatively. This has rendered the nation’s $19 billion in debt unsustainable. However, talks have been going on to renegotiate Ukraine’s debt.

Negotiations with Lenders

George Soros also cited that Ukraine had no alternative for bankruptcy. This is because of lacking any chapter 11 for independent borrowers to end the conflict between lenders and borrowers, mediate negotiations between both parties and decide the debts that were to be reorganized. This situation has forced both Ukraine and its private lenders into negotiating a favorable deal in a setting whereby only might makes right. For Soros, the only negotiating leverage that Ukraine has in such a situation is threatening to default payment if it does not get debt relief. Reference: http://www.nybooks.com/articles/2015/10/08/ukraine-europe-what-should-be-done/

Sovereign Debts

The 1980s Latina America’s situation has proven that sovereign debts can be not only costly but also have long-lasting consequences. Countries that reach speedy agreements with their lenders usually bounce back in the market after a year or even two. Soros attributed the economic issues that cause a default to keeping a country out of the market as opposed to the default itself.

Reforms in Ukraine

The Ukrainian government has been striving to establish structural reforms such as those demanded by the 1989 Brady Plan. Some of these reforms include weaning the country from Russian gas, eradicating corruption, boosting agriculture, improving the judicial system, cleaning up the banking system, integrating the economy with the EU and many others. The billionaire also claimed that if debt relief can boost such reforms, then the investors should demand it and disregard the debate that defaulting would cause problems. This means that if the only way to get debt relief is through defaulting, then investors ought to be applauding instead of condemning Ukraine for contemplating to do so.

George Soros also requested Ukraine’s bondholders to admit to the fear losing their money instead of trying to convince Ukraine that debt relief would spell out doom for the country. He appealed to them to be sincere and quit making such false claims based on their self-interests as opposed to those of Ukraine.

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