IMF chief urges Ukraine's creditors to accept debt restructuring programme

KIEV (Reuters) - International Monetary Fund chief Christine Lagarde on Sunday praised Ukraine's economic progress and urged its creditors to take full advantage of a deal to restructure $18 billion of sovereign and quasi-sovereign debt.

Speaking in Kiev alongside Ukrainian President Petro Poroshenko, Lagarde said: "It is really up to all creditors to take advantage of (this) debt restructuring ... We believe it is a very good arrangement ... We doubt very much that anything better could have been obtained."

Heavily-indebted Ukraine agreed late last month with its largest group of creditors to a deal that includes a write-down of 20 percent of the principal owed, a small increase in the coupon on most of the bonds and a four-year extension of maturity for each bond.

Talks are going on to gain support from the other creditors.

But Russia says it will continue to demand full repayment of a $3 billion eurobond coming due in December because it considers this debt official, not commercial.

Asked at a joint news conference with Poroshenko about the bond, Lagarde said: "It is up to the (IMF) board to determine the characterisation of one bond or the other and I think it will be for the board to decide."

She said she was extremely encouraged by Ukraine's economic progress but urged Kiev to continue the fight to end corruption.

Poroshenko said he expected the Fund to agree on a third tranche of financial aid for Ukraine in October under a four-year Extended Fund Facility (EFF) programme totalling $17.5 billion.

An initial slice of $5 billion was disbursed immediately after the programme was approved by the IMF in March 2015 and another tranche of $1.7 billion was issued in July.

(Reporting by Natalia Zinets; Writing By Richard Balmforth; Editing by Kevin Liffey)