Zelensky’s government seems to always be needing a new multibillion dollar bailout every few months, but is this open-ended stipend sustainable? At what point will Ukraine’s western sponsors start wanting their money back? Recently, Kiev’s creditors have been raising their concerns over the sovereign viability of NATO’s newly created rump state.
“When we agreed the moratorium in 2022, there was ability to pay but obviously a national need to preserve resources,” said one bondholder.
“Now we know the debt is unsustainable, it doesn’t make sense to kick the can down the road.”
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FT reports…
Ukraine’s international bondholders have formed a creditor committee ahead of a $20bn debt restructuring that Kyiv is aiming to negotiate by September, amid uncertainty over the arrival of funding to help in its war with Russia. Bondholders organised the committee, a key step before beginning talks, “in response to a request from the government of Ukraine”, the committee said on Tuesday.
Volodymyr Zelenskyy’s government has signalled that it wants to agree debt relief before the August deadline on a two-year moratorium on payments, which bondholders granted to Ukraine in the early months of Russia’s invasion.
The restructuring, which affects about one-fifth of Ukraine’s external debt pile and could include state companies, is being launched as Kyiv faces huge uncertainty about when it will receive other western funds to help fight the war.
Western governments also disagree over whether or not Ukraine can access up to $330bn in Russian reserve assets frozen in the west for reconstruction — an issue that has already caused frustration among bondholders.
(…) On Tuesday Janet Yellen, the US Treasury secretary, urged Congress to unlock more than $60bn in military and non-military support for Ukraine that has been delayed. G7 countries would continue talks on the frozen Russian assets this week, Yellen added.
(…) Ukraine’s debt “remains unsustainable in the absence of a substantial debt restructuring”, said Evghenia Sleptsova, senior emerging-markets economist at Oxford Economics. But there is “exceptional uncertainty” around the process, given questions around US support and difficulties with making economic projections, she added…
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