Cash-strapped Ukraine appealed for urgent financial assistance yesterday to prevent a default, saying it needed US$35 billion over two years to stop the economy "heading into the abyss".
In one of its first moves since the overthrow of Viktor Yanukovych, the country's new leadership under acting president Oleksander Turchinov called for an international donors' conference and said it needed aid in the next week or two.
But financial analysts said Ukraine's economy was not about to collapse. Its sovereign bonds rallied and the cost of insuring its debt fell in tandem, in a sign of investors' confidence that it would avoid default.
"Over the past two days, we have had consultations and meetings with the EU and US ambassadors and other countries and financial institutions on the urgent delivery of macro-financial assistance for Ukraine," acting finance minister Yuri Kolobov said.
He said the donors' conference should involve representatives of the EU, the US and the International Monetary Fund.
EU foreign affairs chief Catherine Ashton was due in Kiev later yesterday to discuss the economy, with Ukraine's hopes of securing aid boosted by EU Economic and Monetary Affairs Commissioner Olli Rehn's promise of "substantial" aid.
US Treasury Secretary Jack Lew encouraged Ukraine to start talking with the IMF about an assistance package as soon as it could after forming an interim government.
During a trip to Beijing, French Foreign Minister Laurent Fabius said the EU and Russia were both willing to provide financial aid to Kiev.
European nations were willing to provide the aid through the IMF, he added.
Kiev's chances of receiving the remaining US$12 billion of a US$15 billion bailout package agreed with Russia in December, after Ukraine spurned an EU trade deal, seem to have receded.
Moscow, which backed Yanukovych, said it would not release the next US$2 billion tranche until it knew who would be in the government.
It also said any extension of a deal cutting the price Kiev pays for Russian gas - part of December's wider financial deal - must be negotiated with Ukrainian companies and the government.
Ukraine, whose 46 million people produced a gross domestic product last year of US$162 billion, has around US$6.5 billion in external debt payments to make before the end of 2014, and around US$6.5 billion in remaining current-account deficit financing.
It has US$17.5 billion in foreign exchange reserves, which it is expected to continue using for external debt payments.
The country must redeem a US$1 billion eurobond in early June and the government has also guaranteed a US$1.6 billion eurobond issued by state energy company Naftogaz, which falls due in September.
Turchinov, appointed after Yanukovych was stripped of his powers by parliament on Saturday, sounded the alarm about the economy in an address to the nation on Sunday evening.
"Against the background of global economic recovery, the Ukrainian economy is heading into the abyss and is in a pre-default state," he said.
He blamed the catastrophic state of the economy on Yanukovych, whose opulent residence outside the capital was opened to an astonished public at the weekend, and said Ukraine would resume moves to deepen integration with the EU.
Economic growth was zero last year, and the hryvnia currency has lost more than 8 per cent of its value in three months.
More than half of all Ukraine's exports go to Russia, which last year threatened heavy sanctions if Kiev joined the European Union trade pact.
Additional reporting by Teddy Ng