On Monday Kyiv said that it has reached an initial agreement with the creditors of over $20bln government debt owed to the international creditors to ease its burden putting a barrier to the credit crunch that is troubling the country.
Russia’s invasion of Ukraine affected the country economically deeply and the government is forced to rely on donor nations for both defense and food supplies. This is because the proposed plan to bring repayments of international bonds to a halt after the February 8 invasion was made due to the existing original agreement’s expiration on August 1st. The Ukrainian government, in the report to the London Stock Exchange, stated that they had decided on a principle of restructuring them.
This process includes direct cooperation of the creditors, mainly the institutional investors such as BlackRock and Pimco, who are willing to wipe off the billions from the face value of their securities and create a new more beneficial repayment structure for Ukraine.
Significantly, Prime Minister Denys Shmyhal has said, “We are on the path to restoring debt sustainability,” on X, which is now known as Twitter. “This would enable us to reduce our spending on the services of those creditors for our defense, increased social expenditure, and reconstruction,” Ukraine estimates this measure will save the country 3. 4 billion euros in the next three years that would have gone to service debts.
However, desperate negotiations were made by the group of bondholders, stating satisfaction for a constructive and fast agreement, and said that their investment has been made for a long-term perspective in Ukraine. Their argumentation went like this, “We are glad to offer rather massive debt relief to Ukraine,” while at the same time turning down a proposal from Ukraine that had called for far deeper write-downs.