REUTERS
The International Monetary Fund, Ukraine’s key creditor, is insisting that Ukraine completes its debt restructuring talks by June, when the IMF mission will hold its first review of the implementation of the cooperation program approved in March this year, an IMF official said on Tuesday.
It is vital for Ukraine to reach a restructuring deal with creditors before an International Monetary Fund review of its bailout program in June, IMF First Deputy Managing Director David Lipton said.
"We want and expect that outcome. It will be an important consideration in that review," Lipton said in a statement.
Lipton stressed that negotiations with creditors are very important for Ukraine, and they have to be held in compliance with basic criteria, including those identified by experts from the IMF.
"We set forth three criteria that, in our view, are necessary for debt transactions. They relate to the scope of transaction, its impact on debt servicing and the impact on the ratio of government debt to GDP,” said Lipton.
“It is important for Ukraine and its creditors to reach a compromise in accordance with these three criteria."
Lipton said that the agreement on debt restructuring would be one of the main indicators for the review mission, which is scheduled to start on June 15.
He said the cooperation program with the IMF, approved in March, provides for financing the full amount of the declared aid - or $40 billion.
On April 4, the Cabinet of Ministers of Ukraine approved a list of debt obligations for restructuring, upon proposal of the Ministry of Finance. The ratio of government debt to GDP should not exceed the level of 71% until 2020, and the debt financing budget should be no more than 10% of GDP. Restructuring will affect foreign debts incurred before February 28, 2014, and will include a part of the external debt of Ukraine, state-guaranteed external debt and quasi-debt - Eurobonds of state-owned banks, Ukrainian Railways, and the city of Kyiv.
Ukraine has not announced any specific proposals to creditors, except the assurance that all creditors will be in equal conditions. At the same time, according to some experts, one of the possible proposals would be write-off of a part of the debt – in amount of 30-35%.
Such conditions may be unacceptable to creditors. In particular, the committee of foreign shareholders led by U.S. investment fund Franklin Templeton, which is in talks with the Ministry of Finance, has stated it hopes for a "fast resolution" of the negotiations, but is not ready to write off the debt.