An artillery unit in eastern Ukraine on Friday, July 19, 2024. Ukraine said Monday, July 22, that it had struck a preliminary deal with a group of international private creditors to restructure more than $20 billion of the debt it owes them, a step that would save the war-torn country billions and preserve funds to support its battered armed forces. (Tyler Hicks/The New York Times)
- Ukraine agrees with international creditors to restructure $20 billion in debt, saving $11.4 billion over three years, as approved by the IMF.
- Ukrainian Foreign Minister Dmytro Kuleba visits China to discuss ways to end the Russian invasion and explore China's role in peace talks.
- Despite the debt relief, Ukraine faces significant financial needs, with $80 billion in spending this year, half allocated to defense.
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KYIV, Ukraine — Ukraine said Monday that it had struck a preliminary deal with a group of international private creditors to restructure more than $20 billion of the debt it owes them, a step that would save the war-torn country billions and preserve funds to support its battered armed forces.
Creditors Agreed to Write Off More Than a Third
The creditors agreed to write off more than a third of the nominal value of the government bonds they hold, which would allow Ukraine to save $11.4 billion over the next three years, the Ukrainian government said. The deal has been approved by the International Monetary Fund, which has made its financial assistance to Ukraine conditional on the country’s ability to reduce its debt.
Denys Shmyhal, Ukraine’s prime minister, said in a statement that the deal “allows us to free up resources for our defense, social spending and reconstruction.”
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The deal was signed with the largest group of creditors, representing about a quarter of private bondholders. Two-thirds of all bondholders must approve the agreement for it to take effect. Olena Bilan, chief economist at Kyiv-based investment firm Dragon Capital, said “chances are high” that the deal will be approved because of a series of incentives for those bondholders who sign on, such as additional fees.
The government also announced Monday that Dmytro Kuleba, the foreign minister, would be visiting China for three days from Tuesday to hold talks on stopping the Russian invasion and reaching a peace deal. It is Kuleba’s first trip to China since the war started in 2022, signaling Kyiv’s desire to involve Beijing in peace talks that the Chinese government has so far largely snubbed.
China declined to send top officials to a Ukrainian-held peace summit in Switzerland last month that did not manage to rally support from key regional powers such as Brazil and Saudi Arabia. Ukrainian President Volodymyr Zelenskyy accused China then of “working hard today to prevent countries from coming to the peace summit,” a comment that angered Beijing.
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Ukraine Second Peace Summit
Ukraine has said it wants to hold a second peace summit this year and has said that Russia should participate. On Monday, Dmitri S. Peskov, the Kremlin’s spokesperson, did not rule it out.
Ukraine’s foreign ministry said in a statement Monday that Kuleba had been invited by his Chinese counterpart, Wang Yi, and that “the main topic of discussion will be the search for ways to stop the Russian aggression and China’s possible role in achieving a sustainable and just peace.”
The $11 billion in financial relief Ukraine will receive over the next three years with the debt restructuring is modest compared with its financial needs. The country’s total spending this year will amount to roughly $80 billion, half of which will be spent on defense.
But Ukrainian authorities say every dollar counts in a war in which Russia is trying to crush the Ukrainian economy and, ultimately, its war effort, by methodically destroying its nonnuclear power plants. Kyiv has been desperately looking for ways to raise more money to finance its military, selling off a range of state-owned companies and recently proposing tax increases.
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Ukraine Creditors Agreed to Suspend Payments
After Russia invaded in February 2022, Ukraine’s creditors agreed to suspend payments for servicing the debt. An agreement with the private bondholders was due to expire Aug. 1, prompting negotiations with the Ukrainian government to restructure the debt or extend the moratorium.
Negotiations appeared set to fail as both sides proposed very different levels of debt write-off. The Ukrainian parliament last week passed a law allowing the government to postpone external debt payments. A preliminary deal was finally announced Monday, just 10 days before the debt standstill was due to expire.
The deal is important because a Ukrainian default would have likely resulted in a reputational hit for Kyiv, which is looking to attract foreign investors to help sustain its economy and rebuild the country. “We are on the path to restoring debt sustainability,” Shmyhal said.
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The deal will allow Ukraine to continue spending most of its state revenue to support the army instead of diverting vast amounts to service its external debt. The Ukrainian government announced last week that it would increase military spending by nearly $12 billion this year.
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This article originally appeared in The New York Times.
By Constant Méheut/Tyler Hicks
c. 2024 The New York Times Company
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