(MENAFN- AFP) Ukraine and its creditors hit another stumbling block Wednesday after a new debt restructuring offer from Kiev and call for a "decisive" final meeting drew only a tepid response.
The Ukrainian government said Finance Minister Natalie Jaresko's idea of holding a definitive meeting in London on Thursday will have to be pushed back until Monday or Tuesday to give the group of creditors a chance "to improve its proposal."
"Failure to reach an agreement at the sovereign level early next week would force Ukraine to implement alternative options for financing its IMF-supported programme," the finance ministry warned in a statement.
"It is also the last opportunity to reach a full agreement in advance of the September and October Eurobond amortisations and next IMF review now planned for September."
The cash-strapped former Soviet nation must strike a debt restructuring agreement before it is due to make principal and interest payments of more than $500 million on a Eurobond maturing on September 23.
Franklin Templeton and three other US financial titans own about two-thirds of the debt upon which Ukraine is trying to find savings of $15.3 billion over the coming four years.
That target is part of a $40 billion global package the International Monetary Fund patched up to help Ukraine weather severe economic decline that is being exasperated by the pro-Russian revolt in its industrial east.
Jaresko's office Tuesday submitted a revised offer to the bondholders and called the upcoming few days "decisive for the negotiations."
The two sides have spent more than four months wrangling over how much of the bonds' face value could be written off due to Kiev's evident cash constraints.
Ukraine had initially sought a 40 percent cut. The main lenders this month came out with a counter-offer that would see a reduction of between five and 10 percent of the assets' original value under very strict terms.
Sources said the two sides were also at odds over the length of a possible debt maturity extension.
One person said the lenders want to see Kiev start making repayments as soon as it returns to growth. Another official said this issue was not as vital to the discussions as the write-off.
It was not immediately clear where the possible middle ground in the negotiations stood.
But a source close to the so-called Ad-hoc Committee of Noteholders to Ukraine said the creditors were dissatisfied with Jaresko's latest proposal and felt constrained by Kiev's 48-hour notice.
- September 23 -
Kiev has used $4.2 billion of the $5 billion it has received from the IMF in the first half of the year to pay off its past commitments.
Ukraine received a new $1.7 billion payment Tuesday and expects double that amount by the end of the year.
But economists fear that Ukraine's estimated debt to gross domestic product ratio of 135 percent is incompatible with an economic recovery in the short term.
The Fund therefore wants the pro-Western leadership that emerged in the wake of last year's ouster of a Russian-backed administration to focus its resources on overdue economic restructuring that could lead to sustainable growth.
A source close to the negotiations said the terms of the IMF-led rescue meant that Kiev cannot make the September 23 repayment even if it had made the political decision to do so.
"If this payment, which is substantial, is made, it would make Ukraine unable to meet the IMF programme target –- to achieve $15.3 billion in savings in payments due in the programme term," the person told AFP.
"Essentially making that payment in full would push (Ukraine) over that target."
Economists believe that the current debt negotiations will thus determine how Ukraine slips into "technical default" next month.
A deal would probably shield Kiev from being declared in default by the major global credit rating agencies and help keep its costs of borrowing down.
Economists fear that failure to strike an agreement will push Kiev into unchartered territory in which it might even have its foreign assets seized.
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