/Pogled.nfo/ A law that will give the government the right to suspend the payment of foreign debt to creditors considered “unscrupulous” was approved today by the Ukrainian parliament, Reuters reports. The new law is a sign that Kiev is maintaining its position in the negotiations for the restructuring of the country’s debt, the agency notes.
In an effort to plug a $15 billion budget shortfall, Ukraine has been in talks to restructure its debt, but those have stalled in the past week as owners of Ukrainian debt resist any reduction in the value of the principal. and according to Kiev, their position is a sign of lack of trust.
“Our creditors should help us not with words, but with dollars,” Prime Minister Arseniy Yatsenyuk said before the vote in parliament. The law was passed with 256 votes – 30 more than needed.
“Without the help of our creditors in the market, Ukraine will not be able to stabilize and return to economic growth in 2016. In the event that Ukraine is attacked by unscrupulous creditors, the moratorium will help protect state property and the public sector,” the government announced.
Dollar-denominated Ukrainian bonds fell 1.5 cents after the government asked parliament to vote on the new law, and yields hit their highest level in a month.
The debt of the state-owned Ukreximbank, Oshtadbank and Ukrainian Railways, which is currently being restructured, will not be covered by the moratorium.
“The moratorium weakens the position of creditors, as Ukraine effectively tells them not to expect to receive their next payments,” commented Gabriel Stern of Oxford Economics.
On Monday, the group of bondholders that holds $10 billion of Ukrainian debt and is led by Franklin Templeton revealed the identities of its remaining members, seeking to address accusations that it was not acting transparently in the negotiations.
Russia, which owns $3 billion of Ukrainian debt maturing in December, has refused to take part in the talks and said it would turn to an arbitration court if Ukraine failed to meet its obligations.
“Much of the debt that will be restructured is under the jurisdiction of international, not Ukrainian, law, and for that reason the government is organic in the measures it can take to protect itself,” commented Robert Burgess of Deutsche Bank.
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