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Under pressure in various sectors of the frontline, with its power plants and energy grid under relentless attacks, and trying to find a peace proposal that would keep it from losing 20 per cent of its former territory for good, Ukraine is also under financial threat, as concerning news arise over its debt restructuring efforts.
Kiev could default on its enormous debts as early as next month unless it manages to negotiate a restructuring deal with its creditors, The Economist reported (behind paywall).
With the onset of the war in February 2022, bondholders granted Ukraine a two-year debt freeze. That agreement expires in August, and the creditors expect it to begin paying interest on its debt again.
RT reported:
“The arrangement is worth 15% of Ukraine’s annual GDP, meaning that if payments had been required, they would have been Kiev’s second-biggest category of expenditure after defense.
The conflict with Russia has dealt a heavy blow to the Ukrainian economy, which has shrunk by a quarter since the outbreak of hostilities, the outlet said. Kiev’s debt-to-GDP ratio will approach 94% by the end of the year, despite ‘impressive’ Western backing, although this largely comes in the form of ‘artillery, tanks and earmarked funds, rather than cash’, the article noted.”
Kiev hasn’t reached an agreement with a group of foreign investors on a restructuring of the country’s $20 billion debt in Eurobonds.
“Ukraine wants to reduce its debt by 60% of its current value, while creditors said 22% was ‘more reasonable’.
If a new debt-restructuring deal is not reached, Ukraine would end up in default. This would damage the country’s credit rating and complicate its ability to borrow in the future.”
According to The Economist’s report, Kiev may pull off an extension on its debt-service freeze until 2027 – or else have to declare a default.
One way or another, Ukraine is not expected to resume payments to its creditors.
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