Yatsenyuk demands creditors to promptly accept Ukraine's terms regarding the debt

Foreign creditors must agree to Ukraine's proposed terms in negotiations on the restructuring of about $23 billion of debt, Prime Minister Arseniy Yatsenyuk stated on Friday.

Negotiations on the restructuring of Ukraine's debt reached a deadlock this week, as the largest bondholders reiterated their objections to any reduction of the principal amount, while the Ukrainian Ministry of Finance accused creditors of unwillingness to negotiate in good faith.

Speaking in parliament on Friday, Yatsenyuk said that bondholders must first assess the dire state of Ukraine's finances.

The Prime Minister stated that Ukraine is currently at war, which has caused the country to lose 20 percent of its economy. 'We have approached creditors with a clear position on the order and terms of restructuring, - he said. - We ask, appeal and insist that external creditors should assess the current situation and accept Ukraine's proposal, which is a legitimate way to assist Ukraine.”

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The proposal put forth by Kyiv is explained by the severely depleted economy of Ukraine – all the money provided to the country by international financial organizations last year was completely spent on external debt repayments. Currently, according to Yatsenyuk, Ukraine's external debt equals $68 billion.

On Tuesday, the creditor committee, which includes investments from Franklin Templeton and represents investors holding bonds worth about $10 billion, presented new detailed proposals for debt restructuring, but the plan still rejects any “haircut.”

At the same time, Ukraine is under pressure to reach an agreement. The International Monetary Fund insists on obtaining an agreement before it completes its final review of the $17.5 billion bailout program for Ukraine, scheduled for June 2015.

The second tranche from the IMF, amounting to about $2.5 billion, depends on the outcomes of this review. There is no doubt that Ukraine desperately needs funds to bolster its foreign currency reserves.

Final negotiations on the restructuring had previously not been viewed with optimism, but the disagreements that arose this week have further undermined the prospects for a quick deal.

At the same time, Ukraine accused bondholders of lacking a constructive approach.