Ukraine's creditors to share burden of new bailout deal - ministry

By Alessandra Prentice KIEV (Reuters) - Ukraine's Finance Ministry expects to receive up to $15 billion (9.75 billion pounds) from debt talks with creditors, who will have to take on some of the burden of a new bigger international bailout package aimed at shoring up its war-torn economy. The ex-Soviet republic, which is on the brink of bankruptcy after a year of political upheaval and bitter conflict with pro-Russian separatists, said in January it planned to consult with all holders of its sovereign debt. A new $40 billion four-year funding package was unveiled on Wednesday for Ukraine, whose foreign currency reserves stood at just $6.4 billion on Feb. 1, having plummeted 63 percent in 2014. The International Monetary Fund stumped up $17.5 billion for the new financing scheme, but even with other pledges from international donors it is not clear how the full $40 billion will be covered. "Debt negotiations should lead to up to $15 billion," a Finance Ministry spokeswoman told Reuters in an email. The United States, European Union and the World Bank have each pledged an additional $2 billion. The Finance Ministry has not said what it plans to ask of holders of its debt during talks, which many have interpreted as a call to restructure. It expects negotiations to start in early March. Ukraine's dollar bond maturing in 2017 dropped three cents to trade at 54 cents in the dollar on Wednesday, just off an all-time low. QUESTION OF SURVIVAL Further international loans under the bailout scheme are contingent on Ukraine implementing reforms as part of a broader austerity drive. Populist factions in parliament have spoken out against some planned steps. Former Economy Minister Pavlo Sheremeta, who quit the role last year over frustration at the slow pace of reform, told Reuters the dire state of Ukraine's finances should incentivise parliament to pass the necessary laws. "Ukraine has promised reforms many times and never missed the chance not to deliver, but this time I'm slightly more hopeful," Sheremeta said. "This is a question of mere survival for Ukraine, it's quite a different ballgame." Large parts of Ukraine's economy have been effectively wiped out by fighting in industrial eastern territories, and it is forecast to shrink 5 percent this year, following a 7 percent contraction last year. Its struggling hryvnia currency is at an all-time low against the dollar. The new IMF-led programme is enough to stave off bankruptcy for Ukraine, but growth will only be achieved through investment, which is unlikely to be forthcoming while war rages, Sheremeta said. Under a new peace deal between Kiev and rebels, a ceasefire is meant to come into force on Sunday. (Editing by Andrew Roche)