George Soros has been vocal over the years on the strategies that Ukraine should use to get it out of the financial crisis that it is experiencing right now. The billionaire investor has written for various media outlets to try and start a discussion around the best way forward for Ukraine. The IMF had put the country between a rock and a hard place when it said that it would not offer financial support until a deal had been reached with the creditors. The efforts by Russia to destabilize the country had thrown the economy into turmoil. The IMF could not step in because middle party between lenders and borrowers is not allowed. The country was left to handle the issue on its own.
Bankruptcy was declared off the table. Ukraine could only resort to debt relief as the only way out. The country could threaten to default if it does not get help that would put them out of favor with investors. Mr. George Soros advised that allowing the country to get debt relief would speed up the process of recovery. The strategy had worked in the previous years and Mr. Soros acknowledges the Brady Plan that was proposed by Nicholas Brady in the late 80s. The proposal was that it was wise for banks to offer relief to countries that were serious about changing the economic landscape. This allowed investors to judge the feasibility of their investments by looking at the future situations of the country from the reforms that it would take. George Soros Ukraine observed that it was the decisions that were made before the crisis that caused the state to consider defaulting. It was possible for the country to return to the market in a couple of years if things were changed.
George Soros adds that investors who are set to lose money if the country defaults should come out and say so instead of spreading information that debt relief was not fit for the country. Some reforms were outlined in the previously mentioned Brady Plan and Ukraine has been keen to enforce them. These measures include reshaping the judiciary, cutting all ties to Russia, cleaning the country of corruption, and reforming the banking system. Ukraine is also working closely with the European Union to try and mesh the economy with the Union. Mr. Brady works for the largest bondholder in Ukraine by the name Franklin Templeton. The company has been pushing for debt relief even though they have the most to lose.
George Soros notes that it would be a mutual win for both sides if bondholders rally behind debt relief. It is the best deal that they can get at the moment. He also advises against the debt restructuring narrative that has been proposed by some policymakers. This path has not been successful for organizations that have tried it in the past. It is not the best solution for Ukraine. George Soros adds that Ukraine could start its journey to recovery with the full cooperation of the EU and the creditors.
Find additional information on George Soros & Ukraine via Open Society Foundations.org
BandB December 27, 2016
Posted In: Ukraine's Crisis