Ukraine Reaches Preliminary Debt Restructuring Deal with International Creditors

Ukraine Strikes Preliminary Deal with International Creditors

On Monday, Ukraine announced that it has reached a preliminary agreement with a consortium of international private creditors to restructure over $20 billion of its outstanding debt. This significant move is expected to save the war-affected nation billions, thereby preserving essential funds to bolster its beleaguered armed forces.

The creditors involved have consented to a substantial write-off, exceeding one-third of the nominal value of the government bonds they hold. According to the Ukrainian government, this arrangement will enable the country to save approximately $11.4 billion over the next three years. This restructuring deal has also received the endorsement of the International Monetary Fund (IMF), which has linked its financial assistance to Ukraine to the country’s success in reducing its debt burden.

Denys Shmyhal, Ukraine’s Prime Minister, expressed optimism in a statement, highlighting that this agreement will facilitate the release of much-needed resources for defense, social programs, and reconstruction efforts.

The arrangement was formalized with the largest group of creditors, representing around a quarter of all private bondholders. For the agreement to become effective, it requires the approval of two-thirds of all bondholders. Olena Bilan, chief economist at the Kyiv-based investment firm Dragon Capital, noted that the chances of the deal being ratified are quite high, owing to various incentives offered to bondholders who agree to the terms, including additional fees.

In a related development, the Ukrainian government revealed that Dmytro Kuleba, the foreign minister, will embark on a three-day visit to China starting Tuesday. The purpose of this trip is to engage in discussions aimed at halting the ongoing Russian invasion and advancing efforts towards a peace agreement. This marks Mr. Kuleba’s first visit to China since the onset of the war in 2022, underscoring Kyiv’s intention to involve Beijing in the peace dialogue, which the Chinese government has largely overlooked thus far.

China had previously declined to send high-ranking officials to a peace summit held in Switzerland last month, which ultimately failed to garner support from important regional powers like Brazil and Saudi Arabia. Following this, President Volodymyr Zelensky criticized China for allegedly obstructing international efforts to convene at the peace summit, a comment that was met with displeasure from Beijing.