KIEV, Dec. 24 – Ukrainian officials have to sit down for a discussion to see whether the country can avoid default on foreign and domestic debts next year, a top official at President Viktor Yushchenko’s office said Wednesday.

Oleksandr Shlapak, deputy chief of staff at the Yushchenko office, said Ukraine will be able to easily handle foreign debts, estimated at $70 million, that are due before the end of December.

“Domestic companies have to pay $60 million or $70 million to service these papers. There is no problem for a budget,” Shlapak said. “We will not let domestic default to happen.”

“But speaking about the next year, we have to sit down and think on both, foreign and domestic debts,” Shlapak said.

Ukraine’s gross foreign debts are estimated at $100 billion, most of which are owed by companies and corporations. About a third of this debt is due to be redeemed in 2009.

The National Bank of Ukraine holds about $32 billion in foreign exchange reserves as of last week after sending $6.5 billion over the past three months to support the hryvnia.

Arseniy Yatseniuk, a former speaker of Parliament and a former acting governor of the National Bank of Ukraine, said Ukraine will be able to avoid default, but said companies and corporations must now begin talks over restructuring of their debts.

“I don’t think there will be a Ukrainian default,” Yatseniuk said speaking a television talk show late Wednesday. But said the talks were crucial to avoid the worst case scenario.

“Our gross debts exceeded $100 million and all main borrowers mist be holding talks with the creditors on the debt restructuring,” Shlapak said. “So, but doing so we will be able to prevent corporate defaults.”

The issue of possible default looms large as Ukraine’s hryvnia, the local currency, has lost 43% of its value against the U.S. dollar over the past three months.

The issue is in epicenter of political and economic debate in Ukraine after Prime Minister Yulia Tymoshenko had issued a controversial statement accusing Yushchenko of attempts to destabilize the situation on domestic financial market.

“The goal for the president is to make money on the Ukrainian sorrow and to declare default for the country, to make the economy non-working and based on this to continue his leadership,” Tymoshenko said.

Tymoshenko and Yushchenko, seen as the main rivals at the next presidential election due in early 2010, already exchanged sharp personal attacks over the weekend, marking a 12-month period that will end with the election.

But on Wednesday, Tymoshenko extended the attacks when she had suggested that Yushchenko has been seeking to declare defaults and emergency situation to cancel the election and to extend his rule.

“The Ukrainian constitution anticipates that no elections are held in the case of any emergency situation,” Tymoshenko said.

Yushchenko’s office warned on Tuesday that Tymoshenko’s plans to run budget with 2% deficit in 2009 ma further spur the economic slowdown and create problemsin maintaining stability of the hryvnia and steady debt payments.

But Yatseniuk said it will be very hard, if not impossible, to fix the economy without relying on budget deficit.

“Today we cannot handle the Ukrainian economy without the deficit-free budget,” Yatseniuk said. (tl/ez)