Russia blasts possible IMF rule change to help Ukraine

30th October 2015, Comments 0 comments

Russia's finance minister on Friday said Moscow was "concerned" over a possible rule switch by the International Monetary Fund to allow continued aid to Ukraine even if it defaults on debt owed to Russia.

"Russia does not want Ukraine to be left without financial support," minister Anton Siluanov was quoted as saying by Interfax news agency.

"However, we are concerned by the fact that the introduction of changes in the fund's policies is being forced through in the context of the extremely politicised question of restructuring Ukraine's debt."

The IMF said Thursday that it is working on a reform of its lending policies to ease the rule in "carefully circumscribed circumstances," a move that would help keep a mammoth bailout package for Ukraine alive.

Russia has refused to renegotiate $3 billion in debt that cash-short Ukraine is scheduled to repay by the end of the year.

But the stalemate between the two sides puts at risk the IMF's $17.5 billion financial rescue of Ukraine agreed in March.

Under its current internal rules, the IMF is not allowed to lend money to a country when it is in default on debt to the "official" sector, such as another government.

If Kiev defaults on the $3 billion Ukrainian Eurobond bought by Russia, the IMF in principle should cut off credit to Ukraine, even as the country reels from economic crisis and a pro-Russian insurrection.

"The new policy of the fund means that it will lend to a country that still has debts with official creditors, only if the country tried in good faith but failed to reach an agreement with its official creditors," Siluanov said.

"However, Ukraine has not carried out such negotiations with Russia."

Under pressure from the IMF, Ukraine has reached an agreement with private creditors that wipes out $3.6 billion in debt and reschedules repayment on $8.5 billion.

In a statement Thursday, the Ukrainian finance ministry said that creditors involved in the debt restructuring should expect to receive new Ukrainian sovereign securities on November 12.

It had given Russia a deadline of Thursday to either accept the same restructuring terms or face a "legal war" in court.

The $3 billion loan was given by Moscow to Ukraine's former leader Viktor Yanukovych in late 2013 in what Kiev now says was essentially a bribe to get him to ditch a deal for closer ties with the European Union.

Ukraine says that the debt should be considered a commercial loan rather than a formal agreement between the two countries.

Yanukovych's decision to dump the EU agreement sparked protests that eventually led to his ouster and unleashed a chain reaction of events that has included Moscow's seizure of Ukraine's Crimea peninsula and a pro-Russian insurgency in the east of the country.


© 2015 AFP

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