Europe Economy

Ukraine Fin Min: We're broke but we won't default

Ukraine Fin Min: Our coffers are nearly empty

Government bond yields in Ukraine have come under pressure in recent days with talk of debt restructuring making fixed income investors increasingly jittery. But interim finance minister Oleksander Shlapak tried to quell investor concern, telling CNBC that the country would not default on its debts despite being nearly broke.

"I think Ukraine will pay all of its debts with the help of the IMF (International Monetary Fund)," he told CNBC.

(Read More: Klitschko: Putin scared of what's happening in Ukraine)

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A new government was pieced together in Ukraine last week after weeks of civil unrest led to the ousting of President Viktor Yanukovych and a standoff with the Russian military. Ukraine may have once relied on bailouts from neighboring Russia but with a pro-EU opposition now in command, the country is seeking assistance from the European Union and the IMF .

Ukraine's interim leaders have said the country needs $35 billion in aid to avert a default. Shlapak added that $10 billion would be needed this year and $5 billion next year and said that previous loans from the IMF - which had to be frozen - wouldn't suffer the same fate.

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"I think the IMF will not let itself be fooled a third time," he said.

Ukraine in 'desperate financial plight': PM

"We are currently talking with our investors and partners on the issue of aid packages. Correct uses of our resources is the main issue right now. I think that if we can manage this there will be no need for Russian aid."

Nonetheless, Ukraine's new prime minister Arseniy Yatsenyuk described the country's economic situation as "desperate" at an emergency summit of European leaders in Brussels, Belgium on Thursday.

"We are in a desperate financial plight, but the government tries to maintain stability, the government tries to execute its obligations. The government is trying to cover all budget expenditure and to provide social standards to the Ukrainian people," Yatsenyuk said.

Stepan Kubiv, the governor of the Ukrainian Central Bank told CNBC: "Our prime minister confirmed today that we will develop in the direction of European integration and we are planning to sign an association agreement. Thanks to support from the U.S. and the European Union, we are protected from the worst scenario."

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Talk of debt restructuring this week -where terms for repayment are negotiated and changed - caused Ukraine's short-dated dollar bonds to plunge by as much as 6 cents, according to Reuters.Meanwhile, the country's 5-year credit default swaps - the price it costs to insure its debt over a 5-year period - have reached historic highs in recent weeks.

Ukraine is currently using a third of its budget to finance government debt, according to Shlapak. $300 million to $500 million was leaking from Ukraine's budget every month due to different fraudulent schemes like tax evasion, he said, adding that the government is very nearly broke.

"We know that the budget deficit for 2014 is not as it was previously stated," he said. "The main problem is we need $10 billion in debt by the end of the year. This number takes into account higher Russian gas prices for the second quarter of 2014."

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Concerns remain that any money coming from the U.S. or Europe will not be without strings attached. European Central Bank bailouts in Greece, for example, have involved tough austerity packages and fierce opposition inside the country. Shlapak remained adamant that Ukraine could deal with these consequences, saying that Ukrainian citizens were ready to face "economic realities" and also find out the crucial truth about Ukraine's society.

"I hope our new leaders will adopt European principles, we are European, our nation is united," he said.