"Timely debt restructuring is a critical part of support," Ukrainian Finance Minister tells foreign creditors as default at the end of August looms.
The Ukrainian Foreign Minister, Serhiy Marchenko, said talks with a small group of its eurobondholders will continue and reach an agreement by August 1, according to Reuters. An agreement made in 2022 after the Russian invasion to hold off repayments on the bonds expires on September 1. The group of investors consists of representatives of the funds Amundi, Amia Capital, and Black Rock, according to Interfax.
The prospect of the government failing to reach an agreement and defaulting has caused the value of the bonds to plunge to 26 cents on the dollar on the markets.
At present, the government of war-torn Ukraine is no longer able to raise money on financial markets, but investors argue that its chances of raising cash on international markets in the future will be slimmer if it does not show a willingness to at least make small payments now. That would be a repeat of the impasse following the Ukrainian default in 2014 after the first Russian invasion.
On the other hand, the International Monetary Fund wants the debt to be restructured, which means extending deadlines, reducing interest rates, or the capital of the loan.
The deal Ukraine put on the table on Monday envisages investors swapping existing bonds for sovereign bonds maturing between 2034 and 2040 and something called a state-contingent debt instrument (SCDI), which would be linked to Ukraine’s success in raising tax revenue. The investors want faster repayment.
Meanwhile, Ukraine’s main allies do not want the country to be funneling monies it is providing for the war effort to pay off interest on debt, the Reuters report says. Ukraine’s overall debt as a share of the economy’s GDP rose more than 0.8 percentage points to above 90.7% in the first quarter of 2024, the Finance Ministry reported in March. That compares with a ratio of 81.7% in the EU. The private sector may also experience turbulence. The banking sector is due to repay $1.3 billion in the next 12 months, while companies are due to pay $33.6 billion.
The prospect of the government failing to reach an agreement and defaulting has caused the value of the bonds to plunge to 26 cents on the dollar on the markets.
At present, the government of war-torn Ukraine is no longer able to raise money on financial markets, but investors argue that its chances of raising cash on international markets in the future will be slimmer if it does not show a willingness to at least make small payments now. That would be a repeat of the impasse following the Ukrainian default in 2014 after the first Russian invasion.
On the other hand, the International Monetary Fund wants the debt to be restructured, which means extending deadlines, reducing interest rates, or the capital of the loan.
The deal Ukraine put on the table on Monday envisages investors swapping existing bonds for sovereign bonds maturing between 2034 and 2040 and something called a state-contingent debt instrument (SCDI), which would be linked to Ukraine’s success in raising tax revenue. The investors want faster repayment.
Meanwhile, Ukraine’s main allies do not want the country to be funneling monies it is providing for the war effort to pay off interest on debt, the Reuters report says. Ukraine’s overall debt as a share of the economy’s GDP rose more than 0.8 percentage points to above 90.7% in the first quarter of 2024, the Finance Ministry reported in March. That compares with a ratio of 81.7% in the EU. The private sector may also experience turbulence. The banking sector is due to repay $1.3 billion in the next 12 months, while companies are due to pay $33.6 billion.
Source: TVP World, Reuters
