KIEV, May 15 (Reuters) - Foreign creditors must agree to the "legitimate" deal offered by Ukraine in talks on restructuring around $23 billion worth of its debt, Prime Minister Arseny Yatseniuk said on Friday.
Negotiations turned sour this week after a group of Ukraine's largest bondholders repeated objections to any writedown on the principal owed, while the Finance Ministry accused creditors of being unwilling to negotiate in good faith.
Speaking to parliament on Friday, Yatseniuk said that bondholders should appreciate the parlous state of Ukraine's finances.
"The country is at war. We have lost 20 percent of our economy. We approached creditors with a clear position on the procedure and terms of restructuring," he said.
"We ask, appeal and insist that external creditors appreciate the current situation and accept Ukraine's offer, which is legitimate and a way to help Ukraine."
The deal put forward by Kiev foresees a maturity extension and a coupon and principal reduction or "haircut."
On Tuesday the creditor committee, which includes investment firm Franklin Templeton and represents investors holding bonds worth about $10 billion, said it had submitted new detailed restructuring proposals, but the plan still rejects any haircut.
Ukraine is under pressure to reach a deal.
The International Monetary Fund says it wants an agreement in place before it concludes its latest review of Ukraine's $17.5 billion bailout programme, which is slated to go to the IMF board in June.
A second tranche of about $2.5 billion hinges on the outcome of the IMF review. Ukraine sorely needs the cash to shore up foreign currency reserves.
Concluding restructuring talks by June was always considered optimistic, but the divisions that emerged this week further undermine prospects for a quick deal.
Ukraine has accused bondholders of not being constructive, while the bondholder committee said neither Kiev nor its advisers had shown substantive engagement with its initial plans delivered four weeks ago. (Reporting by Natalia Zinets; Writing by Alessandra Prentice; Editing by Richard Balmforth)