Russia threw a lifeline to Venezuela on Wednesday, restructuring the more than $3 billion it is owed by its economically and politically troubled South American ally.
The Russian Finance Ministry said the debt of $3.15 billion would now be repaid over 10 years, with minimal repayments during the first six years.
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"Reducing the debt burden to the republic from the restructuring of liabilities will allow the funds that have been freed up to be allocated to the country's economic development, to improve the liquidity of the debtor, and to increase the chances of all creditors to recoup credits provided to Venezuela," the Russian finance ministry said in a statement.
The agreement comes just as Venezuela's cash-strapped government teeters on the edge of a default on some $150 billion in outstanding debt. Struggling with a crumbling state-led economic model, President Nicolás Maduro's administration is seeking to renegotiate payment terms with its creditors in an effort to free up import dollars needed to resolve chronic shortages of food and medicine.
"Venezuela is advancing toward the recomposition of its external debt, to the benefit of its people," Mr. Maduro's top economic adviser, Simon Zerpa, said in a Twitter post, lauding the deal with Russia.
Venezuelan officials said the agreement would allow them to increase imports from Russia, including of wheat. The restructuring deal Wednesday doesn't cover $6 billion in debt that Venezuela's state energy giant PdVSA still owes to Russia.
PdVSA, the lifeblood of Venezuela's oil-dependent economy on Wednesday said it made an interest payment on a bond that matures in 2027. The $80 million was originally due on Oct. 12 but had become one of several bond payments that the government has fallen behind on since last month, raising concerns of an imminent default.
Venezuela over the past decade has turned to allies like Russia for economic support as Caracas aimed to distance itself from its ideological foes in Washington. Loans and credits from Russian state-controlled oil giant PAO Rosneft to PdVSA have been vital for the South American country, which has seen oil production fall and its economy shrink by a third since 2014, according to the International Monetary Fund.
Mr. Maduro has blamed his country's financial troubles on a series of sanctions leveled by the Trump administration earlier this year and has turned to his allies, especially Russia and China, for breathing space.
"We believe that the Venezuelan government and people are capable of properly handling their debt issues," China Foreign Ministry spokesman Geng Shuang said in news conference in Beijing Wednesday.
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(END) Dow Jones Newswires
November 15, 2017 12:34 ET (17:34 GMT)