WASHINGTON, November 13 (RIA Novosti) – US asset manager Franklin Templeton has acquired $5 billion worth of Ukrainian debt despite the former Soviet nation’s unsure economic future, the Financial Times reported.
The purchase, which amounts to almost 20 percent of Ukraine’s outstanding international government bonds, follows Franklin Templeton’s earlier purchase of Irish debt, which earned the firm both profits and credit for calming the country’s markets during the euro-zone crisis.
But experts believe the Ukrainian debt purchase may be riskier as the country is struggling with a weak economy, a large budget deficit and dwindling currency reserves, according to a Financial Times report published Sunday.
Although the possible signing of a free trade agreement with the European Union later this month could ultimately benefit Ukraine’s economy, experts told the newspaper that it was “only a matter of time” before Ukraine requires outside aid or crashes altogether.
“They face a currency and funding crunch, it’s as simple as that,” said Paolo Batori, a senior strategist at Morgan Stanley.
“The trigger point could come tomorrow, it could come next week, or next month. But Ukraine is simply not equipped to deal with another wave of outflows. It needs the help of a third party, whether that is Russia or the IMF,” he told the Financial Times.
“If Ukraine fails to sign the [EU agreement] I think they face a real risk of a full-blown economic and financial crisis,” Timothy Ash of Standard Bank told the newspaper. “The economic options are narrowing fast.”
Senior Ukrainian government officials visited Franklin Templeton’s California headquarters earlier this year in a bid to provide reassurances to the asset management group, the Financial Times reported, citing Ukrainian media.
When contacted by the Financial Times, Franklin Templeton declined to comment.
