May 22, 2015 / 4:12 PM / 5 years ago

'Noticeable progress' made in Ukraine debt talks - Finance Minister

KIEV (Reuters) - Ukraine’s Finance Minster said on Friday she expected to meet face-to-face with creditors as “noticeable progress” had been made in talks to restructure $23 billion of national debt.

Negotiations hit a stumbling block last week, when both sides accused the other of a lack of engagement. Kiev has since ratcheted up pressure on bondholders, by threatening to halt debt payments if a “good-faith, collaborative” solution is not found.

Ukraine is now in regular contact with a group of its largest bondholders, Finance Minister Natalia Yaresko told Reuters by telephone from Riga, striking a more optimistic note.

“There is noticeable progress ... Advisers are in contact every day ... we expect that in the future the next step will be a meeting with the creditors,” she said.

A key sticking point has been bondholders’ repeated objection to a writedown on the face value of the bonds, a ‘haircut’ Ukraine insists is necessary to make the $15.3 billion in savings required under a International Monetary Fund-backed $40 billion bailout programme.

Yaresko, who was attending a European Union summit in the Latvian capital, declined to say exactly how much of a writedown Kiev is looking for.

Ukraine has been pushed close to bankruptcy by a conflict with Russian-backed separatists in the east.

It had hoped to reach an agreement by June, ahead of a review needed to unlock its next $2.5 billion tranche of financial aid from the IMF.

While officially Kiev must reach a restructuring deal to receive the IMF money, Yaresko suggested the decision to disburse the funds does not hinge on the conclusion of talks with creditors.

“It’s not the same sort of deadline like some of the other benchmarks,” she said.

“I expect that we will do this as quickly as possible and finish as quickly as possible,” she said when asked if talks could rumble on until September, when the first bond being restructured matures.

On Tuesday, parliament backed the law allowing Kiev to hold back debt payments from creditors if needed, but since then the finance ministry has paid the coupon due on a $1 billion Eurobond, Yaresko said.

Many holders of Ukrainian bonds are unperturbed by Kiev’s threat to halt debt payments, but Russia, which holds $3 billion of Ukraine’s bonds and is its second-biggest creditor, has called Kiev “unprofessional”.

Asked if Ukraine intended to pay Russia the coupon due on its bond on June 20, Yaresko declined to comment.

“At the moment Ukraine is fulfilling all its obligations. It’s better I not comment on what will happen in the future,” she said.

Ukraine has repeatedly said it will treat all its creditors the same in the restructruing process.

Writing by Alessandra Prentice; Editing by Ruth Pitchford

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