Ukraine expects commercial debt treatment in place by mid-2024

By Wendy Van Sickle

Columbus, Ohio, April 6 – Ukraine said its authorities expect to begin discussions with commercial creditors in early 2024 to address its debt, according to a news release from the country’s ministry of finance.

Ukraine said its goal is to have a commercial debt operation completed as quickly as possible, and no later than mid-2024.

In August 2022, Ukraine reached an agreement with its international bondholders that included a voluntary 24-month deferral of debt service on its direct and state-guaranteed eurobonds, and similar deferral agreements were reached with other external creditors.

Ukraine said the operations provided it with liquidity relief to help finance essential social and humanitarian needs caused by its invasion by Russia and ongoing war.

Ukraine said that the aim of beginning talks with commercial creditors in 2024 is to base discussions on the most current macro-fiscal framework and debt sustainability assessment in its anticipated International Monetary Fund-supported program.

The Ukrainian government has reached agreement with IMF staff on policies that could be supported by a new Extended Fund Facility, Ukraine said.

The government expects Ukraine’s macro-fiscal framework will remain sensitive to the evolution of the war in the coming months, and Ukraine is facing unprecedented balance of payment difficulties and public debt is assessed as unsustainable based on the IMF’s sovereign risk and debt sustainability framework for market access countries. Thus, Ukrainian authorities requested the IMF-supported program to help address its payments needs and to help restore its medium-term external debt sustainability.

“To this end, Ukrainian authorities are committed to undertake a debt treatment of Ukraine’s public external debt,” the release states.

Ukrainian authorities are expected to assess a number of alternative scenarios to implement a needed debt treatment, with the objective of restoring Ukraine’s market access as early as practicable.

The three goals of the debt treatment will be to restore Ukraine’s debt sustainability; to preserve liquidity and reduce Ukraine’s financing gap; and to create the necessary conditions for commercial sector participation in the post-war reconstruction of Ukraine.

The official bilateral creditors have committed to a two-debt debt treatment program.

Official creditors have committed to an extension of the standstill from Aug. 1, 2022 over the period of the IMF program from 2023 to 2027 and an additional debt treatment to restore debt sustainability, once the situation is stabilized or at the latest by the end of the IMF program in 2027.

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