The new rules, which will be discussed at the IMF Board of Directors, allow for the continued funding of the borrower with its sovereign debt default. This rule of the IMF can spread to previously signed contracts.
WASHINGTON, 11 Nov. The international monetary Fund (IMF) could apply new rules that allow the continued funding of the borrower with its sovereign debt default and will only be discussed at the Board of Directors in November, to previously concluded credit contracts in the first place, to the contract with Ukraine, said a source familiar with the progress of the reform of the Fund.
“Can apply the right of subrogation”, — he said in answer to the question of whether covered by the reforms undertaken by the IMF, to previously signed contracts for financial assistance. The person has confirmed that such a procedure is not common practice for lending institutions. But the IMF is trying to work in advance. The official representative of IMF has left the question unanswered.
Currently, the policy prohibits the IMF to provide financial assistance to countries which have experience of overdue payments to sovereign creditors. Ukraine has the risk to prevent a default on Treasury bonds by Russia at $ 3 billion, the maturity date of which occurs in December.
Bloomberg on Tuesday, citing a source reported that Russia is seeking options to block the next tranche of the IMF, if the default will be allowed. However, officials of the Russian Federation spoke about this possibility. So, the Minister of Finance Anton Siluanov didn’t exclude that Russia can exercise its right to sovereign borrowers and to require the Fund to recognize funding programme of Ukraine is untenable.
Experts have previously expressed doubts that the Fund will go to the aggravation of relations with the Paris club creditors will resort to such an unpopular measure, as the right of subrogation (revision of contracts already concluded under the current rules of the Fund).
Commenting on the reforms the IMF in terms of tolerance continue funding the borrower if it defaults on certain sovereign debts, the press Secretary of the Fund Jerry rice had previously been assured that this is just one of the points of the programme from 2014 and does not concern any specific country. A revision of the policy of the Fund can be reviewed in the near future, said rice, for example, on the Board of Directors in November.
The four-year program of financial assistance to Ukraine was approved by the IMF Board on March 11, 2015. The programme envisages allocating the Fund’s $ 17.5 billion dollars, and all international creditors over four years — $ 40 billion. Ukraine this year has already received 6.7 billion dollars in aid and allocated a further two tranches of 1.7 billion dollars.
The Ukrainian government treats the debt to Russia in $ 3 billion as commercial, as it was formed as a result of redemption of bonds to the Irish stock exchange. However, according to the rules of the IMF, the tool in this case is irrelevant. The status of the debt qualifies for the purchaser. However, Ukraine is actually trying to equate the Russian debt to other commercial debts, which were purchased on the market at a discount up to 40%.
The offer from Ukraine, which Russia refuses to discuss it, involves a credit for 20% less, and some years after completing the program of IMF financing. Meanwhile, Russia has bought bonds of Ukraine at full price, low, market, using its own reserves from the national welfare Fund.