Ukrainian servicemen fire during a military exercise near the eastern city
Kiev - AFP
IMF chief Christine Lagarde on Tuesday pressed Ukraine's hold-out creditors such as Russia and a handful of Western investment houses to write off some of the crisis-wrecked country's massive debt.
Lagarde's intervention came as an International Monetary Fund mission arrived in Kiev to assess Ukraine's committment to economic restructuring and belt-tightening measures that would unlock money that could help the cash-starved government stay float.
That money is vital to help keep Ukraine on its path toward Europe and cushion the blow of the 17-month pro-Russian separatist war.
But not everything is going according to Kiev and the Fund's plan.
A group of smaller private lenders have reportedly refused to join a debt write-down agreement that Ukraine had struck with its four largest commercial bondholders last month.
Moscow is also demanding the December repayment of a $3.0 billion bond it had issued to Russian-backed president Viktor Yanukovych in the months preceeding his February 2014 ouster by waves of pro-European protests.
"High participation by all concerned Eurobond holders in the upcoming debt exchange is paramount, since Ukraine lacks the resources under the programme to service its debts on the original terms," Lagarde said in a statement.
"Together with the authorities and the Ad-Hoc Creditor Committee, I call on all creditors to support this offer."
Franklin Templeton and three other financial titans agreed in late August to take either a cut or delay in repayment of some $18 billion in Ukrainian Eurobonds.
But Kiev must ensure that a smaller group of commercial lenders that were not part of those discussions agree to the same terms.
Western media reports said that Aurelius Capital Management -- the same US hedge fund now battling the government of Argentina -- is not only balking but also has a big enough share of the bonds to sink the entire deal.
Moscow has also refused to discuss more lenient conditions with Kiev's new pro-Western government.
The IMF's managing director appeared to be referring in part to Russia by insisting "that the (Kiev) authorities' programme warrants the strong support of the international community."
The Fund's rescue is at the heart of a $40 billion package that nations and international organisations earmarked for Ukraine at the start of the year.
But the entire deal hinges on Ukraine's ability to restructure $15.3 billion in debt over the coming four years.
The IMF has suggested that it would continue to issue Ukraine with new money as long as serious discussion with bondholders were underway.
- Growing debt burden -
The IMF hopes that Western assistance will not only help Ukraine reverse its three-year recession and adopt global production standards but also halt its diplomatically-costly reliance on Moscow's financial help.
The separatist war that Russia denies fomenting in Ukraine's vital industrial heartland will likely see the economy shrink by as much as 10 percent this year.
The Fund has released more than $10 billion in loans so far this year -- money that Kiev has primarily used to stave off default by covering its maturing debt.
Ukraine's US-born Finance Minister Natalie Jaresko told investors on Monday that her team was keeping up with its commitments and expecting the release of the next IMF tranche payment in the coming months.
But the refusal by Russia and some commercial creditors to restructure billions of dollars in interest and coupon payments is not the only problem facing Kiev's hard-pressed government.
The Fund-led package also requires Ukraine to cut its debt to below 71 percent of gross domestic product by 2020.
But Ukraine's central bank said the figure had actually shot up to 122.8 percent from 95.1 percent since the start of the year.