Ukraine Government Also Considering Debt Restructuring... Likely to Conclude Before September

The principal and interest on bonds that the Ukrainian government must pay will increase significantly in September. [Image source= Bloomberg]

[Asia Economy Reporter Park Byung-hee] As the war in Ukraine enters its fifth month and financial pressure on the Ukrainian government intensifies, it has been confirmed that the government is now considering debt restructuring, a measure it had previously rejected.

According to Bloomberg, citing sources, the Ukrainian government is reviewing various options related to financial management and is now contemplating debt restructuring as one of the possible measures, as reported on the 30th of last month (local time).

Ukrainian President Volodymyr Zelensky has consistently expressed a desire to fulfill obligations to investors holding Ukrainian government bonds, showing a commitment to continue principal and interest payments despite the difficult circumstances. This is because he believes that even after the war ends, massive costs will be required for Ukraine’s reconstruction, and maintaining trust with foreign investors is essential to securing necessary funds.

However, as the war prolongs, financial pressure is mounting, and it appears that debt restructuring is now being considered.

Sources say that the Ukrainian government will make a final decision on whether to request debt restructuring by late summer. The deadline is seen as September 1, when $1.4 billion worth of bonds mature and interest payments are due.

According to Bloomberg, Ukrainian government bonds maturing in September are currently trading at prices discounted by more than 40% from their face value.

The International Monetary Fund (IMF) is currently advising the Ukrainian government on financial management. In early March, the IMF provided Ukraine with an emergency loan of $1.4 billion. Ukraine had previously agreed to borrow $5 billion from the IMF in 2000. By the time the $1.4 billion loan agreement was made in March, $2.8 billion of the $5 billion had been disbursed, with $2.2 billion remaining. However, the IMF and Ukraine agreed to suspend the remaining $2.2 billion disbursement and to devise a new funding plan.

The National Bank of Ukraine expects Ukraine’s gross domestic product (GDP) to decline by at least 30% this year. Due to the recession, the Ukrainian hryvnia is also under downward pressure. To prevent the hryvnia’s depreciation, the central bank significantly raised the benchmark interest rate from 10% to 25% at its monetary policy meeting on the 3rd of last month.

This content was produced with the assistance of AI translation services.