IMF won’t stop lending to Ukraine even if private loans aren’t paid

The IMF can continue lending to Ukraine even if it doesn’t service some of its private debt, said on June 10 David Lipton, the IMF’s first deputy managing director, as reported by Bloomberg. “We have a policy of lending into arrears that allows us to continue lending to a member-state when it has arrears with private creditors, providing it’s fulfilling all its other commitments that it made to us,” Lipton said.

Alexander Paraschiy: Such a comment from a top IMF official adds some bargaining power to the Ukrainian government in its talks on restructuring USD 23 bln in state and quasi-sovereign debt owed to private lenders. Recall on May 19, the Ukrainian parliament adopted a law granting the government the authority to choose to avoid servicing some of the debt that’s in the perimeter of the debt operation. With Lipton’s statement, the Ukrainian government seems to have received a green light from the IMF to use a repayment moratorium on certain debt instruments as an argument in its negotiations. Needless to say, that should cool interest in Ukrainian sovereign bonds.