Russia has refused to accept the same terms as Ukraine’s private sector creditors who have agreed to write down a chunk of the government’s outstanding 16 billion euros owed to them..
War-torn Ukraine has been struggling to satisfy the conditions of an International Monetary Fund bail-out, which requires it to secure relief on its mounting debt.
“Twenty percent of debt obligations of the country have been written off by our creditors, around 3.6 billion euros, and over the next four years Ukraine will not pay off any of the principal loans”, said Prime Minister Arseniy Yatsenyk.
The announcement comes as Ukraine’s economy continues its slow recovery after appearing sunk last winter. .
The deal should give the country some crucial breathing space.
““This kind of reduction of the obligations of Ukraine to pay back is very important”,
said Anna Derevyanko, Executive Director of the European Business Association. “Because then we see, there is more opportunities inside the country, to stabilize the macroeconomic situation, to have more funds for development of the economy, more opportunities to give positive signals to the foreign business community, to foreign investors.”
But what would have really helped Ukraine is for Russia to have accepted the same terms as the private creditors.
The Kremlin has flat refused, insisting that it is sticking to its end of year deadline for Ukraine to pay it back the 2.6 billion euros that will then be due.
Since the two countries are clashing over the conflict in eastern Ukraine that is not really surprising.
Nevertheless the deal has at least brought embattled Kiev some temporary relief.
Ukraine’s problems are far from over however. The clashes in the east go on, and analysts expect the economy to contract by over eight percent this year.