Ukraine’s crucial debt talks hit a new stumbling block

Sources close to both Kiev and the four big commercial debt holders told AFP that Ukrainian Finance Minister Natalie <g data-gr-id="25">Jaresko’s</g> idea of holding a potentially definitive meeting in London on Thursday may have to be pushed back.

The cash-strapped former Soviet nation must strike a debt restructuring agreement before it is due to make principal and interest payments of more than $500 million on a Eurobond maturing on September 23.

Franklin Templeton and three other US financial titans own about two-thirds of the debt upon which Ukraine is trying to find savings of $15.3 billion over the coming four years. That target is part of a $40-billion global package the International Monetary Fund patched up to help Ukraine weather an economic implosion that is being exasperated by the pro-Russian revolt in its industrial east.

<g data-gr-id="28">Jaresko’s</g> office submitted a revised offer on Tuesday to the bondholders that it said was “fully in compliance with the targets of the IMF-supported programme.” 

“This week will be decisive for the negotiations,” the Ukrainian finance ministry said.

The two sides have spent more than four months arguing over how much of the bonds’ face value could simply be written down due to Kiev’s evident cash constraints.

Ukraine had initially sought a 40-per cent cut. The main lenders this month came out with a counter-offer that would see a reduction of between five and 10 <g data-gr-id="26">per cent</g> of the assets’ original value under very strict terms. Sources said the two sides were also at odds over the length of a possible debt maturity extension.

One person said the lenders want to see Kiev start making repayments as soon as it returns to growth. Another official said this issue was not as vital to the discussions as the write-off.