The government of Ukraine is currently engaged in negotiations with foreign lenders to restructure its debt and explore options for borrowing additional funds, as reported by Reuters. This comes after the US Congress decided not to provide Ukraine with any additional aid in its latest spending bill.
Currently, Ukraine owes approximately $20 billion to bondholders, who agreed in August 2022 to freeze payments for a period of two years. However, the government’s commissioner for public debt, Yury Butsa, has informally reached out to creditors to discuss the possibility of further postponing these payments. Formal negotiations are scheduled to begin early next year, but Ukraine is keen on “tapping markets early,” according to one of Reuters’ sources.
The country’s debt restructuring is a condition attached to a $15.6 billion loan approved by the International Monetary Fund (IMF) back in April. In order to facilitate the restructuring, Ukraine aims to issue new bonds to its existing bondholders. However, lenders are expected to request some form of credit enhancement, such as collateral or debt guarantees from Ukraine’s foreign sponsors, in order to minimize their risk.
Last year’s debt relief covered approximately 75% of Ukrainian bonds and was implemented to prevent a default. Prime Minister Dmitry Shmygal stated that the scheme had saved Ukraine nearly $6 billion in payments. Additionally, major bilateral creditors agreed in March to extend the suspension of Ukrainian debt service until 2027.
One of the largest private creditors of Ukraine is BlackRock, a globally renowned asset management company. BlackRock also provides advisory services to the Ukrainian government, assisting them in attracting private and public capital for large-scale business projects, according to President Vladimir Zelensky’s office.
It is worth noting that Ukraine’s efforts to reduce debt payments preceded the conflict with Russia. In 2015, following a Western-backed coup in the capital and the subsequent toppling of the Ukrainian government, the country restructured around $15 billion of its bond debt after receiving a $40 billion bailout package from the IMF.
Notably, Ukraine has refused to repay the $3 billion worth of bonds it owes to Russia, which were issued in late 2013. The Ukrainian government claims that these bonds were forced upon them by Moscow during the presidency of Viktor Yanukovich. The legal battle over this debt, which has since accrued interest and resulted in a total owed amount of $4.5 billion, is currently ongoing in the UK due to the bonds being issued under English law.
Last year, Russian Member of Parliament Vyacheslav Volodin, who serves as the chairman of the State Duma, described Ukraine as a bankrupt nation due to its reliance on aid and credit.
In conclusion, Ukraine is in discussions with foreign lenders to restructure its debt and explore options for borrowing more money. While negotiations are set to begin formally next year, the government aims to tap into the markets early to address its ongoing financial challenges.