KIEV, Aug. 28 – The government’s failure to resume borrowing from the International Monetary Fund may put Ukraine in default early next year when the country has to repay massive debt, former President Viktor Yushchenko said Tuesday.

Yushchenko blamed the government for lack of economic reforms, while lack of borrowing options puts greater pressure on the National Bank of Ukraine to start printing money to cover the budget deficit.

“I don’t want to be a person who delivers the bad news,” Yushchenko said. “But I think not much of a cushion has been left.”

“Do you want me to make a forecast? It’s all covered with red flags,” Yushchenko said. “This process has turned into uncontrolled mode as I see no answers to these challenges. World experts place Ukraine as the No. 4 in the world’s default list. This is absolutely correct.”

The comments come days after Ukraine has borrowed $1 billion via an issue of Eurobonds and a month after placing a $2 billion Eurobond as the government has been struggling to bridge budget gap. The latest issue of Eurobonds bears an annualized coupon payment of 7.95%, the high rate that the government can hardly afford, Yushchenko said.

“We have a budget deficit covered with some of the most expensive borrowing in Europe,” Yushchenko said. “We have unacceptable balance of payment deficit and vague ideas of how we are going to cover it.”

Prime Minister Mykola Azarov on Tuesday denied speculation the country’s finances are strained and that the hryvnia, the local currency, may lose value right after parliamentary election due on October 28.

“Opposition politicians are now saying the hryvnia will hold through the election and than will collapse,” Azarov said in Mykolayiv region. “Where is your responsibility behind the people? You know perfectly that this is not going to happen, so why are you triggering the speculations?”

Yushchenko, who leads the opposition Our Ukraine party for the election, said the government needs to immediately restart cooperation with the IMF and other financial organizations that provide cheap funds in exchange for economic reforms.

This is especially true as Ukraine is due to repay $5 billion in debts in early 2013, a strain that it will be very hard to handle for the government.

“The next year begins with what we have to repay $5 billion in loans that had been borrowed by [the government of then Prime Minister] Yulia Tymoshenko at [an annualized] 27-28%,” Yushchenko said, adding it was unlikely the IMF would resume its lending by that time.

An IMF team is expected to arrive in Ukraine this week on a mission to check whether the government is line with its economic and fiscal policy projections.

The team will work with the government August 29 through September 5 to assess the 2013 budget, energy and social assistance programs.

But the resumption of $15 billion loan was unlikely this year after Azarov had earlier this month refused to go ahead with hiking domestic natural gas prices, an important part of the IMF-backed energy sector reform.

The loan was suspended for the past two years as the government has refused to hike the prices amid concerns the move would backfire against the ruling Regions Party ahead of the parliamentary elections.

But Azarov tried to downplay the impact of the upcoming elections on the economy and on the government, signaling little changes ahead.

“Is there going to be an apocalypse or disaster after the election?” Azarov said. “There will be the same government that is working now and it will continue the same economic course.” (tl/ez)