Ukraine debt crisis: Russia refuses to accept terms as Kiev finally secures debt write-off deal with creditors

Moscow says it will not be part of a deal to write off 20pc of Ukraine's debt mountain

Kiev's finance minister has urged Russia to take part in debt restructuring

Russia has refused to accept the terms of a private sector debt write-down agreed between Ukraine and its creditors after months of international wrangling.

Kiev announced it had struck an agreement for a 20pc haircut and a four-year maturity extension with a committee of its largest private creditors over $18bn of government debt.

• Kiev faces fight with creditors as it reels from Putin's blows
• Kremlin heads for collision course with Ukraine over debt haircut

Ukraine has been battling to satisfy the conditions of an International Monetary Fund bail-out, which requires it to secure relief on its $72bn debt mountain for its war ravaged economy. The government had previously called on its creditors to accept a 40pc loss on the country's bonds.

But the terms of the deal - which provides around $3.6bn of debt relief - was immediately rejected by Moscow.

Russia holds $3bn in eurobonds and has maintained that it will be paid back at the end of the year. Moscow's acting finance minister Anton Siluanov said the country would not be part of the restructuring.

Ukraine's finance minister Natalie Jaresko urged the giant neighbour, which annexed part of the Crimea region last year - to accept the conditions.

"I’m offering Russia a restructuring opportunity that is the same as everyone else’s,” she said.

“I’m hopeful that they will participate in this. It’s the best way to depoliticise this. It’s the best way for us to all move forward together.”

Ukraine's economy has been decimated by its conflict with Vladimir Putin's Kremlin. The country has lost a fifth of its entire economic output, seen its debt pile rise to unsustainable levels and the currency collapse by more than 60pc against the dollar.

With fighting still raging with pro-Russia separatists in the east, GDP is set to contract by a further 8pc this year - the worst of any economy in Europe, the Middle East and Africa. Economic output fell by an extraordinary 17.8pc in the first three months of the year.

Under the terms of the restructuring - which was endorsed by the IMF - creditors will receive growth-linked bonds from 2021.

Ukraine will also suspend payment of $1.1bn of debt maturing over the next two months, said the finance ministry. The Russia-owned bond, along with a further $3.6bn, is due to mature at the end of 2015.

IMF chief Christine Lagarde said the agreement would "help restore debt sustainability" and urged on all bondholders to support the deal to get Ukraine back on its feet.

“I am very pleased with today’s announcement and appreciate the positive attitude of both the ad hoc Creditor Committee and the Ukrainian government", added Mr Lagarde.

By Mehreen Khan