Ukraine halts $3bn Russian Federation debt repayment
“Considering that Russia has refused, despite of our efforts, to sign an agreement in the restructuring and to accept our proposals, the cabinet is imposing moratorium on payment of the Russian debt worth $3 billion”, Yatsenyuk reportedly said during a cabinet meeting Friday.
The IMF has taken Russia’s side and recognized Ukraine’s debt as sovereign, meaning Kyiv would have to declare default if unable to pay.
The moratorium would be in place “until the acceptance of our restructuring proposals or the adoption of the relevant court decision …”
“We propose postponing the government’s tax code until the first quarter of the next year, so that it will be implemented by 2017”, said Yuriy Lutsenko, the head of the party.
Russian President Vladimir Putin offered to restructure the debt last month if a Western country or non-governmental financial organization backed the debt on Ukraine’s behalf, but none offered.
The Finance Ministry sounded a more conciliatory note, saying in a statement: “Ukraine remains committed…to negotiating in good faith a consensual restructuring of the December 2015 Eurobonds”.
Still, William Jackson, a senior emerging markets economist at London-based Capital Economists consultancy, said Friday’s announcement “does feed into broader concerns that the country’s International Monetary Fund program is now at risk”.
The Ukrainian parliament has allowed the government to impose a moratorium on state debt repayment in May.
Moscow-Kyiv relations have been strained since Ukraine’s Black Sea peninsula of Crimea rejoined the Russian Federation following a referendum in March 2014.
Kyiv has refused to meet Sunday’s due date on a $3 billion (€2.77 billion) loan that Moscow gave to authorities led by former Ukrainian president Viktor Yanukovich in December 2013, when they were rocked by huge street protests.
Ukraine, its finances reeling from a two-year-old conflict with Russian-backed separatists in the east of the country, had pushed Russia to join a $18 billion restructuring with commercial creditors this year. Ukraine has said it has no intention to replay it.