The IMF Board will discuss the change of the Fund’s approach to lending in November


MOSCOW, November 2. The IMF Board will discuss the change of the Fund’s approach to lending to countries with sovereign debt, in November; there are risks that will materially damage the interests of many sovereign creditors, not just Russia, told reporters Deputy Finance Minister Sergei Storchak.

“Related discussions at the level of the Board of Directors will be conducted in November, the risks associated with the fact that will materially damage the interests of many other sovereign creditors, not only the Russian Federation, are real,” said the Deputy Minister.

He noted that “zero-tolerance policies of the IMF to the amount outstanding to official creditors has a story, this story is rooted in the 80-ies, when a massive problems of sovereign debtors”.

“At the end of the 80s the IMF has adopted specific regulations and procedures, in order to find a balance of interests between the sovereign creditor and private creditors, often they are much more than a sovereign creditors. Zero-tolerance policies toward default, it is directly related to the fact that the Foundation is an institution functioning in quota resources that give member countries (of the Fund). It is the sovereigns, and, of course, the sovereign cannot simultaneously out of one pocket to give resources to sustain the viability of the IMF, and on the other side to agree to a situation in which in the presence of the program of economic stabilization or enhanced program funding, as in the case of Ukraine, the debtor refuses to service debts to the sovereign lender”, – said the Deputy Minister.

Storchak noted that “the attempt to balance the interests of sovereign and private creditors – a thing very difficult, delicate”. “Traditionally, the sovereign lenders have settled debts before private creditors. And hence a zero-tolerance policy expirations. And the second aspect of this policy – a policy comparable to the terms of the settlement. As a rule, the debtor could not afford the terms of a settlement with private creditors are better than the conditions that official creditors agreed to it earlier”, – he explained.

Ukrainian trace

“Although work in this direction is conducted not the first year, but the episode with the Ukrainian debt several stimulated this work, have accelerated it. The relationship between the sovereign creditor and private creditors – that’s not the attitude of the episode, it is this relationship that will be permanent, especially considering the fact that curtailed interbank lending to sovereign borrowers, a growing number of sovereign borrowers prefer to use markets bonded loans,” – said Storchak.

The international monetary Fund is currently revising the rules of lending to countries that have sovereign debt. As said the official representative of the Fund Jerry rice, the IMF Executive Board will consider this issue in the near future. The Finance Ministry sees the relationship between the change in lending policy of the IMF and the Ukrainian debt. The Ministry has repeatedly stated that Ukraine’s debt to Russia is official in nature and, accordingly, is not subject to restructuring and the write-off in the framework of the program of Kiev for private lenders.

Earlier, the Minister of Finance of the Russian Federation Anton Siluanov reported that the Ministry of Finance of the Russian Federation does not participate in the meetings of private creditors of Ukraine on restructuring the debt of Kiev, insisting that repayable in December of this year the debt of Ukraine to the Russian Federation may not be treated as debts to private creditors, debt has a different status is official. According to him, the Ukrainian authorities were repeatedly informed the Russian side that Russia expects repayment in full and on time. Siluanov pointed out that if Kiev fails to pay $ 3 billion, the Russian Federation will go to court.

Earlier, Prime Minister of Ukraine Arseniy Yatsenyuk in an interview with Handelsblatt said that Ukraine will not repay its state debts to Russia if Moscow does not agree to its restructuring. In this case, Kiev will declare a moratorium on debt repayment, he said.

Credit To Kiev

In December 2013, the presidents of Russia and Ukraine Vladimir Putin and Victor Yanukovych have agreed that Moscow will give Kiev a loan of $15 billion through the placement of Ukrainian securities. Under this program, bonds for $3 billion were placed on the Irish stock exchange 20 December 2013 and bought by Russia at the expense of the national welfare Fund.

After Kiev agreed with creditors to restructure its debts, with the exception of Russia, Finance Minister Anton Siluanov has repeatedly said that Moscow is ready to turn to international arbitration courts, as well as directly to the international monetary Fund (IMF) in December if Ukraine fails to pay its debt. The last coupon payment on the loan were made by Ukraine in June 2015 Now Russia expects full repayment of the loan in December of the current year.

However, October 15, Yatsenyuk said that Ukraine is ready to sue Russia over debt-restructuring. According to him, Kiev offers Moscow until October 29 to review the conditions of the Ukrainian party debt restructuring and partial forgiveness, which were previously proposed by the ad hoc Committee of creditors.