De-facto default: Poroshenko extends moratorium on payment of debt to Russia for indefinite period

President of Ukraine Petro Poroshenko has signed the Supreme Rada-passed bill extending the moratorium on repayment of Ukraine’s $3 billion state debt to Russia for an indefinite period. The amount was borrowed in 2013 by ex-president Victor Yanukovych’s government.

Earlier, on December 18, Ukraine’s government imposed a moratorium on the payment of the debt to Russia for a period until July 1 2016. The then prime minister Arseniy Yatsenyuk explained that Russia refused to join the agreement signed by private creditors to restructure Ukraine’s debts.

A day earlier, on December 17, the IMF Board of Directors recognized the status of Ukraine’s debt to Russia as sovereign (not private or commercial). This means that the government-borrower undertakes the repayment commitments.  Then IMF changed its own rules banning financing of a bankrupt-state such as Ukraine. Afterwards, on April 12, the Supreme Rada imposed a moratorium on payment of its foreign debts for an indefinite period. Poroshenko has signed the moratorium today.

In January 2016, Russia filed a lawsuit to the High Court in London against Ukraine over its $3 billion debt. At present, Ukraine is working with legal advisors ahead of the trial.