# Ukraine seeks debt payment freeze as war ravages economy
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-07-20
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Ukraine Debt Crisis: Bondholders Asked for 2-Year Payment
Meta Description: Ukraine will ask bondholders to agree to a 2-year delay on debt payments amid financial struggles caused by Russia's invasion. Read more.
URL: https://financedigest.com/ukraine-seeks-debt-payment-freeze-as-war-ravages-economyhtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-07-20t103613z1lynxmpei6j0hirtroptp4ukraine-crisis-kharkiv-1736815558535-compressed.jpg)

By Natalia Zinets and Marc Jones

KYIV/LONDON (Reuters) – Ukraine will ask international bondholders to agree to a 2-year delay on its debt payments so it can focus its dwindling financial resources on repelling Russia, a government resolution published on Wednesday showed.

Facing an estimated 35-45% crash in GDP this year following Moscow’s invasion in February, lawmakers have instructed the country’s finance ministry to negotiate the deferral on its roughly $20 billion of debt by August 15.

The delay, which many creditors say is likely to be accepted and was quickly backed https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Europa/Krieg-in-der-Ukraine/statement-zum-schuldenmoratorium-fuer-die-ukraine.html by major western powers, would come just in time to put off [around $1.2 billion of debt payments](https://www.financedigest.com/around-the-world-in-mobile-payments.html "Around the world in mobile payments") due at the start of September.

The government’s resolution posted on its website said, “all [interest payment dates for the bonds”](https://www.financedigest.com/delivery-hero-ramps-up-interest-payments-to-raise-1-billion-euro-convertible-bond.html "Delivery Hero ramps up interest payments to raise 1 billion euro convertible bond") would be deferred under the plan.

In a bid to avoid what would be classed as a hard default, Kyiv plans to offer lenders, which include governments and many of the world’s largest investment funds, additional interest [payments once the freeze ends](https://www.financedigest.com/the-end-of-payments-as-we-know-it.html "The end of payments as we know it").

[Ukraine has estimated a fiscal shortfall of $5 billion](https://www.financedigest.com/g7-offers-9-5-billion-new-aid-for-ukraine-ready-with-more.html "G7 offers .5 billion new aid for Ukraine, ready with more") – or 2.5% of pre-war GDP – a month, which economists calculate pushes its fiscal deficit to 25% of GDP, compared with just 3.5% before the conflict.

On top of that researchers from the Kyiv School of Economics estimate that it will already take over $100 billion to rebuild Ukraine’s bombed infrastructure, while the head of the EU’s powerful financing arm, the [European Investment Bank](https://www.financedigest.com/token-inc-launches-london-office-to-answer-demand-from-european-banks.html "Token, Inc. Launches London Office to Answer Demand from European Banks"), has warned it could run into trillions.

We, as official bilateral creditors of Ukraine, intend to provide a coordinated suspension of debt service,” a group of governments [including the United](https://www.financedigest.com/stanchart-weighing-options-including-sale-of-aircraft-lessor-unit.html "StanChart weighing options, including sale, of aircraft lessor unit") States, Canada, France, Germany, Japan and Britain said shortly after Ukraine made its proposal.

We also strongly encourage all other official bilateral creditors to swiftly reach [agreement” the group](https://www.financedigest.com/aon-announces-agreement-to-acquire-risk-management-firm-creating-a-comprehensive-cyber-risk-management-advisory-group.html "Aon announces agreement to acquire risk management firm, creating a comprehensive cyber risk management advisory group") added.

Wednesday’s move had marked something of a U-turn from Kyiv, which had repeatedly said in recent months that it planned to [keep up debt payments](https://www.financedigest.com/the-late-payments-toolkit-how-to-keep-the-cash-flow-strong.html "THE LATE PAYMENTS TOOLKIT – HOW TO KEEP THE CASH-FLOW STRONG") despite the war.

![Ukraine's bonds brace for default](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/ukraine-bonds-1736815558518-compressed.jpg)

Speculation that a debt freeze request could be imminent however was fanned last week after the country’s state-run [energy firm](https://www.financedigest.com/varo-energy-buys-80-of-dutch-biogas-firm-aims-to-double-capacity-by-2026.html "Varo Energy buys 80% of Dutch biogas firm; aims to double capacity by 2026") Naftogaz also requested one.

A proper restructuring still needs to happen, said Viktor Szabo, a portfolio manager at abrdn which holds Ukraine’s [government bonds](https://www.financedigest.com/lg-says-not-a-forced-seller-of-uk-government-bonds.html "L&G says not a forced seller of UK government bonds"). “But it cannot be done before the situation normalizes on the ground, i.e. a sustained cease-fire at least.”

Ukraine has a host of bonds, [borrowings which add up to over $20 billion](https://www.financedigest.com/bytedance-in-talks-with-banks-to-borrow-over-3-billion-sources-say.html "ByteDance in talks with banks to borrow over billion, sources say") in total. The government also plans to postpone payment on a growth-linked ‘warrant’ offered after its last restructuring in 2015, which was designed to pay investors handsomely if the [economy hit](https://www.financedigest.com/uk-economy-set-for-smaller-hit-in-2023-than-previously-feared-imf.html "UK economy set for smaller hit in 2023 than previously feared – IMF") its stride.

Tymofiy Mylovanov, an adviser to the Ukrainian presidential office, had [urged Western countries to increase their financial support](https://www.financedigest.com/u-s-state-officials-urge-support-for-landmark-26-billion-opioid-settlement.html "U.S. state officials urge support for landmark billion opioid settlement") in recent weeks.

Global institutions such as the International Monetary Fund, World [Bank and Western governments have committed to providing $38 billion](https://www.financedigest.com/first-abu-dhabi-bank-could-renew-35-billion-offer-for-stanchart-bloomberg-news.html "First Abu Dhabi Bank could renew billion offer for StanChart -Bloomberg News") since the invasion, although almost 80% of that support is made up of loans rather than aid.

Wednesday’s move from Ukraine had little [impact on the bonds](https://www.financedigest.com/stanchart-ceo-says-at1-bond-wipeout-has-profound-impact.html "StanChart CEO says AT1 bond wipeout has profound impact") that Kyiv wants to delay. The prices of most of those [bonds had already slumped](https://www.financedigest.com/green-bonds-are-set-to-drive-corporate-esg-debt-out-of-slump-in-2023-barclays.html "Green bonds are set to drive corporate ESG debt out of slump in 2023 -Barclays") roughly 80% since the start of the year when the build up of Russian troops on its eastern borders began.

($1 = 29.5000 hryvnias)

(Additional reporting Karin Strohecker in London, Editing by Timothy Heritage, Elaine Hardcastle, William Maclean)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---