Ukraine Secures Preliminary Debt Restructuring Deal with International Creditors

Ukraine Reaches Preliminary Deal with International Creditors

On Monday, Ukraine announced that it has successfully negotiated a preliminary agreement with a consortium of international private creditors to restructure over $20 billion of its outstanding debt. This significant move aims to alleviate the financial burden on the war-embattled nation, ultimately preserving essential funds to support its ravaged military efforts.

Under the terms of the agreement, the creditors have consented to a substantial write-off, relinquishing more than one-third of the nominal value of the government bonds they possess. As a result, Ukraine is projected to save approximately $11.4 billion over the next three years, according to statements made by the Ukrainian government. This restructuring deal has garnered approval from the International Monetary Fund (IMF), which has tied its financial assistance to Ukraine’s capacity to manage and reduce its debt effectively.

Denys Shmyhal, Ukraine’s Prime Minister, expressed optimism about the agreement, stating, “This deal enables us to unlock crucial resources for our defense, social programs, and the process of reconstruction.”

The arrangement has been established with the largest faction of creditors, which represents about one-quarter of the total private bondholders. To activate the deal, two-thirds of all bondholders must give their endorsement. Olena Bilan, the chief economist at the Kyiv-based investment firm Dragon Capital, remarked that “the likelihood of the deal being approved is high,” citing various incentives offered to those bondholders who choose to participate, including additional fees.

In a separate announcement, the Ukrainian government revealed that Foreign Minister Dmytro Kuleba is set to embark on a three-day visit to China, commencing Tuesday. His agenda includes discussions aimed at halting the ongoing Russian invasion and exploring potential pathways to a peace agreement. This marks Mr. Kuleba’s first trip to China since the onset of the war in 2022, signaling Ukraine’s intent to engage Beijing in peace negotiations—a move that the Chinese government has largely overlooked to date.

Recently, China opted not to dispatch senior officials to a peace summit hosted in Switzerland, which was attended by Ukraine but failed to garner support from significant regional players like Brazil and Saudi Arabia. Following this, President Volodymyr Zelensky expressed his frustration, accusing China of “actively working to prevent countries from participating in the peace summit,” a statement that reportedly displeased Beijing.