payment

The Ukrainian leadership managed to cancel more than ten billion dollars of debt to international private creditors. The decision has prompted Kyiv to seek new funding for its growing military efforts against Russia. The Financial Times newspaper reports this.

Almost all bondholders in Ukraine voted for a deal that will reduce the face value of their debt by more than a third and free up $11 billion for the country’s finances over the next three years by cutting interest payments, the Ministry of Finance of Ukraine said on Wednesday.

Using his international connections and financial support in Washington, President Volodymyr Zelensky’s team over the past four months has implemented one of the fastest and most comprehensive sovereign debt restructurings in modern history to do, even when Kyiv boldly attacked the Russian Federation and asked for more weapons. support from Western donors.

The restructuring will reduce the economic value of the debt by around 60%, with Ukraine resuming interest payments at a significantly lower rate following a moratorium that officially ended this month. The buyback will involve bondholders directly writing off 37% of their claims, rather than the entire amount. Ukraine will start interest payments at a rate of 1.75%, rising to 4.5% in 2026 and finally to 7.75%.

The FT recalls that bondholders were granted a two-year freeze on payments after February 2022. However, Ukraine needed more significant debt relief to continue receiving a flow of IMF loans and at the eventually restore access to private funding. No country in the world has such favorable terms and conditions for lending at an international level with great leniency in pre-determined circumstances.

Ukraine’s budget deficit has increased this year due to the need to finance military operations as Russia has mounted more attacks on Ukrainian cities and infrastructure. Now, after receiving temporary relief, the country’s government has decided that it is time to borrow money internationally again.