WASHINGTON (Reuters) - The International Monetary Fund on Thursday urged Russia and Ukraine to discuss restructuring a $3 billion Ukrainian Eurobond but also said it was discussing reforms that might allow continued support for Ukraine even if it goes into arrears on the debt.
Russia has refused to participate in talks between Ukraine and private creditors on restructuring the bond, which is due for redemption in December, arguing that it should be classified as official intergovernmental debt and is therefore subject to different rules than for sovereign debt owned by private firms.
Ukraine said on Thursday Russia had rejected a second chance to agree to a debt restructuring deal, paving the way for a possible court battle.
"The IMF encourages both sides to engage in constructive discussions on the restructuring of this bond to promote the necessary financing for the program being supported by the IMF in Ukraine and to help restore debt sustainability," IMF communications director Gerry Rice said.
The IMF's board could soon take up a long-running review of a policy that currently prohibits the Fund from lending to a country that goes into arrears on official debt, he said.
"It includes discussion of reforms that would allow the Fund to lend in the presence of arrears to official bilateral creditors in carefully circumscribed circumstances," he said.
Efforts to restructure Ukraine's debt are seen as crucial to shoring up its war-torn economy, following a conflict between government forces and pro-Russian separatists in the east.
Ukraine insists it will not pay the debt in full or offer better repayment terms than those offered to other creditors in restructuring talks.
A deal would allow Kiev to plug a $15 billion funding gap under an IMF-led $40 billion bailout programme.
The other holders of Ukraine's sovereign and sovereign-guaranteed debt, who have agreed to the deal, will receive new securities under the agreement on Nov. 12, Ukraine's finance ministry said in a statement.
(Reporting by Krista Hughes; Additional reporting by Alessandra Prentice in Kiev; Editing by Mohammad Zargham and Susan Fenton)
