Ukraine has less than a month to avoid default

Ukrainian and German leaders hold a press conference at a conference on Ukraine's reconstruction in Berlin, Germany, on June 11.

Creditors have agreed to suspend debt payments for two years, but the deadline for repayments to private foreign bondholders expires on August 1, leaving the country with only a short time to avoid default.

According to The Economist , a default on Ukraine's debt could damage investor confidence, which would be disastrous for its post-war recovery, as well as complicate Ukraine's future access to financial markets.

Ukraine has proposed a deal to reduce the value of its current debt by 60%, while creditors say 22% is more reasonable. The IMF wants to reach an agreement with Ukraine on debt relief, but it is unlikely to reach an agreement in the available time frame.

Ukraine is in dire need of financial assistance. While allies have provided a lot of aid, it has been in the form of weapons and targeted funding, not cash. The EU has pledged more, but that still amounts to just $38 billion over three years.

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According to the IMF, Ukraine will only be able to manage if it carries out a radical restructuring that bondholders have rejected. If a restructuring agreement is not reached, Ukraine will have two options: arrange an extension of the moratorium or default.

The reluctance of private investors is not only a reflection of Ukraine's financial prospects, but also shows that lending money to a country in conflict comes with risks, since it is betting on the country winning.

Ukraine needs an additional $9.5 billion this year to finance critical recovery efforts in the defense, energy, housing reconstruction, agriculture, natural resources, digital and information technology sectors.

The Ukrainian Ministry of Finance is continuing negotiations with Eurobond holders on restructuring, in particular on writing off part of the debt in the near future. However, these discussions will be made public.

Meanwhile, a group of foreign bondholders, including BlackRock BLK and Pimco, plan to push Ukraine to resume interest payments on its debt next year.

Source: https://thanhnien.vn/ukraine-con-chua-day-mot-thang-de-tranh-vo-no-185240702105044817.htm