Ukraine reaches agreement with creditors on comprehensive external debt restructuring

Ukraine has reached an agreement with the Eurobondholders’ Committee on the restructuring of its external debt. This will save $11.4 billion on debt service over the next three years.

And by 2033, the savings will amount to $22.75 billion. This was announced by Prime Minister Denys Shmyhal.

“We are restoring debt sustainability. Today, we have reached agreements in principle with the Committee of Holders of Eurobonds of Ukraine. This is an important stage in the debt restructuring process, which will save USD 11.4 billion on debt service over the next three years and USD 22.75 billion by 2033,” he explained.

The saved funds are to be used for defense, social protection and recovery.

Finance Minister Sergiy Marchenko added on Facebook that negotiations with private and official creditors and the International Monetary Fund had lasted for months. The current agreement concerns a comprehensive restructuring of the state’s external commercial debt.

“The agreement will save USD 11.4 billion on debt service over the next 3 years. By 2033, the savings will amount to USD 22.75 billion. This will free up vital financial resources that can be used for defense and social spending. The completion of this restructuring agreement will create the conditions for Ukraine’s early return to the international capital market once the security situation stabilizes to finance the rapid recovery and reconstruction of our country,” he explained.

Ukraine has $19.7 billion in outstanding bonds and owes $2.6 billion in GDP warrants, a fixed-income instrument whose repayments are tied to economic growth. The warrants were created as part of Ukraine’s debt restructuring in 2015. Ukraine offered to write off 25 to 60% of its debt, depending on the situation in the country. Creditors offered no more than 20%. If the negotiations were to reach a deadlock, it would be a powerful incentive for the hryvnia to appreciate in all segments of the currency market. If the restructuring terms prove favorable to Ukraine, the national currency will remain relatively stable at least until the fall of 2024.

Last week, the Verkhovna Rada upheld the government’s right to suspend public debt payments during the restructuring process.

Tags: Ukraine, credit