Ukraine needs IMF bailout to avoid default

  • 11/10/2015
Ousted Ukrainian President Viktor Yanukovich (Reuters)
Ousted Ukrainian President Viktor Yanukovich (Reuters)

Ukraine is confident the international community won't let Russia hold "hostage" an IMF bailout package that Kiev needs to avoid default, a source close to the Ukrainian government says.

Russia has been blocking the International Monetary Fund's US$17.5 billion (NZ$26.44 billion) rescue plan for Ukraine, which hinges on Kiev's ability to restructure billions of dollars in debt, including some held by Moscow.

"There's little appetite in the world to let Russia, after all that has happened, take hostage the IMF program for Ukraine. It's not going to happen," the Ukrainian source said on the sidelines of the IMF and World Bank annual meetings in Lima, Peru.

Moscow has refused to budge on the repayment of US$3 billion it issued to Russian-backed president Viktor Yanukovych in the months preceeding his February 2014 ouster by waves of pro-European protests.

Although Ukraine struck a deal in August with its four largest commercial bondholders to ease repayment on some US$18 billion in debt, Russia's intransigence has threatened to scupper the entire bailout.

If the impasse is not resolved, Ukraine is set to default when the Russian-held bond comes due in December.

The rescue funds are vital to keep Ukraine's new pro-Western government afloat and cushion the blow of a raging pro-Russian separatist war in the east.

Russia calls the US$3-billion bond it holds a government-to-government loan whose repayment is mandated by international law. But Ukraine says it should be treated as a commercial loan, which would enable the IMF rescue to go ahead.

Ukrainian Finance Minister Natalie Jaresko met her Russian counterpart Anton Siluanov in Lima, but the two failed to resolve the standoff.