Ukraine Says Won’t Repay Russian Debt
Ukrainian Prime Minister Arseniy Yatsenyuk said Friday that his government is imposing a moratorium on the repayment of a $3 billion loan due to Russian Federation this weekend. “Till our proposals on restructuring are adopted or till the relevant judgment is delivered”, Yatsenyuk added.
“We are prepared for court action from the Russian side”, Yatseniuk said.
He did not indicate when Ukraine would be ready to repay the debt.
The Eurobond matures on December 20, but Ukraine has a 10-day grace period before it will be considered to be in default.
The non-payment won’t trigger cross-defaults on Ukraine’s other sovereign debt since it has all been restructured.
In November, Russian President Vladimir Putin proposed a debt restructuring, saying Moscow would be willing to agree to payments of $1 billion a year between 2016 and 2018. But, separately, the Washington-based lender criticized Ukraine’s parliament Friday, accusing it of all but scuttling a tax-overhaul plan needed to unlock much-needed IMF funds. “Otherwise, a legal case would probably ensue, unnecessarily complicating the ongoing political discussions surrounding eastern Ukraine and the sanctions”.
The Ukrainian government rejected a Kremlin proposal for repayments in three tranches of $1bn, putting the entire amount on the path to default. Moscow said it would file a lawsuit against Kyiv to the worldwide court if the payments were not met.
William Jackson, an emerging markets analyst at Capital Economics, said the implications of the moratorium were unclear.
More than 9,000 people were killed in fighting between Russia-backed separatist rebels and Kyiv troops in east Ukraine since April 2014, and the European Union blames Moscow for driving the revolt.
Moscow and Kyiv have been locked in a bitter showdown over a Russian $3 billion loan granted to the pro-Moscow regime of ex-president Viktor Yanukovych in December 2013, not long before he was ousted and fled to Russia.
On Friday, Ukraine’s finance ministry said that it expects the new rule to “allow the International Monetary Fund to continue financing Ukraine”, despite Kyiv’s position.
