KYIV (Reuters) – Ukrainian President Volodymyr Zelenskiy signed a law allowing the government to suspend foreign debt payments until Oct. 1, paving the way for calling a moratorium that would formally mark a sovereign default.
Earlier this month, Ukraine announced a preliminary agreement with a committee of its main bondholders to restructure its international debt worth almost $20 billion.
Driven by Russia’s full-scale invasion in 2022, it will be the second overhaul of its kind in a decade, following a similar deal following the 2014 invasion of Crimea.
A two-year payment moratorium on these bonds expires on August 1.
Bondholders still need to approve the deal, which they are expected to do, although the technical details behind it could take weeks.
But a short-term default would have a less significant impact on its long-term financing prospects than a default with no deal in sight.
The proposal would represent a nominal 37% cut in Ukraine’s outstanding international bonds, saving Kiev $11.4 billion in payments over the next three years – the duration of the country’s program with the International Monetary Fund, according to with government statements.
Ukraine also owes a $34 million coupon payment on its 2026 Eurobond, due August 1, with a 10-day grace period.
Ukraine’s Finance Minister Sehriy Marchenko previously praised the deal with bondholders. But he also told the RBC-Ukraine channel that the negotiations were not easy, citing “significant differences” in the assessment of the situation in which Ukraine finds itself.
(Reporting by Yuliia Dysa; Editing by Andrew Heavens and Conor Humphries)
