It appears that Ukraine’s pleas for debt deferral have been answered, after a group of western creditors agreed to extend the country’s upcoming bond payments to the end of 2023.
With Russia’s invasion leaving Ukraine’s economy in shambles, international creditors, including Canada, the US, Britain, France, Germany, and Japan announced they will extend Kyiv’s $20 billion worth of debt payments due in August to the end of 2023. Under the plan, all of the government’s bond interest payments would be deferred, and payments on growth-related “warrants” offered after Ukraine restructured its financial system in 2015 would also be postponed.
“We, as official bilateral creditors of Ukraine, intend to provide a coordinated suspension of debt service,” said the group. “We also strongly encourage all other official bilateral creditors to swiftly reach agreement.” It is forecast that Ukraine’s GDP will drop anywhere between 35% and 45% in 2022, with costs of the war— coupled with reduced tax revenues— are set to send the nation’s fiscal position into a $5 billion-per-month shortfall.
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“The disruption to fiscal cash flows and increased demands on government resources caused by the war has created unprecedented liquidity pressures and debt servicing difficulties,” said Ukraine’s finance ministry, as cited by Reuters.
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