Ukraine parliament backs crucial debt write-off deal

Ukraine's parliament on Thursday backed a crucial debt restructuring agreement that will save Kiev billions of dollars and keep the war-torn country from falling into an unmanaged default.

A financial pact signed last month with the former Soviet republic's biggest commercial lenders concerns nearly $19 billion in bonds that come due over the next four years.

Cash-starved Ukraine has been suffering through a severe economic depression since a devastating war broke out with pro-Russian insurgents in its eastern industrial heartland early last year.

Kiev had threatened to stop making bond payments if no deal was found -- a dangerous decision that could have shut it out of global lending markets and only extended its economic downturn.

But the deal -- hampered by months of fruitless negotiations and concluded with a 20-percent debt write-down -- still hung on approval from populist Ukrainian lawmakers who take a dim view of their country's continued reliance on outside help.
Deputies passed each of the three bills in the restructuring package by overwhelming margins after listening to impassioned speeches from both Prime Minister Arseniy Yatsenyuk and Finance Minister Natalie Jaresko -- the pact's principal architect.

"This is a very important day for our country," Yatsenyuk told the chamber minutes before the vote. "We are talking about our country's future."

Jaresko herself tweeted that Greece -- another nation hit by tremendous debt burdens and engaged in tortuous negotiations with creditors -- "could only dream of such a deal".

"The reduction of Ukraine's debt burden will strengthen our macroeconomic stability, revitalise the economy and -- thanks to that -- attract investment," her office said in a statement.

- 'End of the beginning' -

Kiev allies such as the United States view the debt deal as a vital part of broader efforts to wrest Ukraine out of Russia's historic orbit and anchor its future with the West.

Former US treasury secretary Larry Summers wrote in The Washington Post that Ukraine now had "the best, most market-oriented economic team in its history".
To paraphrase (Winston) Churchill, this may not be the end, or even the beginning of the end of Ukrainian economic reform, but it may be the end of the beginning," said Summers.

Parliament's approval -- accomplished through intense government lobbying efforts -- was instrumental to keeping alive a $40-billion global rescue that the International Monetary Fund had patched together in February.

But the loans required a compromise with bondholders that could save Ukraine $15.3 billion by 2018.

The final agreement will see the lenders -- Franklin Templeton and three other financial titans -- take a 20 percent "haircut" to the face value of their bonds but obtain slightly higher interest payments in return.

The entire group of Ukrainian bondholders -- including a group that was not part of the original restructuring talks -- now has 21 days to approve the entire framework.

Kiev must also find a way to handle a $3 billion Russian bond payment that falls due in December -- money that Moscow lent to Kremlin-backed leader Viktor Yanukovych just months before his ouster in February 2014.

Moscow has refused to join the restructuring negotiations and is demanding the entire payment on time.