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Kremlin: imposing moratorium on foreign debt payment in Ukraine means step towards default

May 19, 2015, 21:09 UTC+3

Ukraine’s parliament has approved the law granting the government the right to impose moratorium on foreign debts payments

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Dmitry Peskov

Dmitry Peskov

© Artyom Korotayev/TASS

MOSCOW, May 19. /TASS/. Imposing moratorium on foreign debts payments by Kiev means a step towards default of Ukraine’s economy, the Russian presidential press secretary Dmitry Peskov said Tuesday.

"As a matter of fact this is a step towards default," Peskov said.

Ukraine’s parliament approved the law granting the government the right to impose moratorium on foreign debts payments on Tuesday. The document presented by the Prime Minister Arseniy Yatseniuk, was upheld by 256 MPs.

First Deputy Chairman of Russia's State Duma's Financial Markets Committee Vladislav Reznik also commented on the Ukrainian parliament's decision.

"This is the first step towards declaring default though this decision itself does not mean default as they have to /officially/ declare it. This will be followed by many serious consequences, for Ukraine this will be really bad. But as of today, as no default has been declared Ukraine’s obligations towards Russia are still in palce," Reznik said.

Prime Minister Arseny Yatsenyuk said Ukraine was to pay $30 bln of foreign debt and $17 bln of domestic debt within four years. He added that the moratorium concerns only private creditors, holding the debt of Ukraine.

Russia expects Ukraine to pay back its debt on $3 bln euro-bonds in December 2015. Kiev regards its $3 bln Eurobonds held by Russia as a private loan and that is why it is subject to the moratorium.

In late 2013, Russia made a decision to invest up to $15 bln in Ukrainian Eurobonds. Soon the first tranche worth $3 bln with 2-year maturity, a coupon rate of 5% and semi-annual coupon yield payment, was purchased. The remaining $12 bln were not allocated to Ukraine. One of the bond covenants was the liability not to allow growth of Ukraine’s public debt to GDP ratio above 60%.

Earlier Russia's Deputy Finance Minister Sergey Storchak said Russia will not take part in restructuring of Ukraine's debt and is expecting the next debt payment from Ukraine in June.

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