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‘Safety Cushion’: IMF Looks for Ways to Opt Out of Ukraine Debt No-Go

© AFP 2023 / MANDEL NGANThe seal of the International Monetary Fund is seen at the headquarters building in Washington, DC on July 5, 2015
The seal of the International Monetary Fund is seen at the headquarters building in Washington, DC on July 5, 2015 - Sputnik International
The IMF has urged Russia and Ukraine to negotiate the payment of Kiev’s $3 billion debt to Moscow, even though the outcome of these talks is clear to everyone, economist Igor Kovalev said in an interview with Sputnik.

“We’re not part of those negotiations. I’ve said that here many times, but we have welcomed the initial contact and discussions between the two sides, and we encourage Ukraine and Russia to continue these discussions to find a cooperative solution that contributes to the financing and the debt objectives of the programs, so we are urging continuation of these discussions," said Gerry Rice, Director of the IMF Communications Department and IMF spokesman said on Thursday.

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He added that even though the IMF Board had earlier approved the disbursement of $1 billion to Ukraine, to get the second instalment Kiev would have to implement a fiscal and pension reform and complete the restructuring of the remaining part of its sovereign debt.

In an interview with Sputnik Igor Kovalev said that IMF rules allow bailouts to debt-ridden nations only if they demonstrate a sincere desire to resolve their debt problems which is something Kiev has failed to do.

“Despite its long overdue sovereign debt Ukraine has been promised over $17 billion in small instalments in order to encourage them to go ahead with structural reforms. Part of these funds are being stolen, while everything the people there can see is utility bills going through the roof and people becoming poorer every day,” Kovalev said.

He added that the IMF’s decision to give Kiev just $1 billion instead of the originally promised $1.7 means that the Fund wants to have a “safety cushion” by denying any further money to Kiev if it realizes that Ukraine will never be able to repay this debt.

Mentioning the $3 billion Kiev still owes Russia, Kovalev said that Ukraine would return to the negotiation table but only to put forward more demands unacceptable to Moscow.

“Kiev originally wanted this debt to be restructured just like corporate debts normally are, but these rules never apply to sovereign debts, that’s why Russia turned this down. It is clear that chances for any breakthrough here are next to nil and that the matter will have to be decided on a court floor,” Igor Kovalev said in conclusion.

The High Court of Justice in London is going to hear the case of Ukraine’s $3 billion debt to Russia on January 17-20.

Moscow filed a lawsuit against Ukraine in the London High Court in February after Kiev defaulted on repayment of a $3 billion loan that Russia granted to Ukraine in 2013.

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