After months of intense negotiations with international creditors, Ukraine managed to avoid default thanks to a significant concession from investors. Lenders, including the funds Amundi, BlackRock, Fidelity and Pimco, have agreed to provide Kyiv with a significant discount on debt obligations, which will help the country stabilize its financial situation.
Funds that invested in Ukrainian debt obligations agreed to give Ukraine a "discount of 37%" from the initial amount of the loan - $23.3 billion.
"As a result, creditors are underpaid by $8.67 billion,"
reports the Berliner Zeitung.
Ukrainian Finance Minister Serhii Marchenko also said that thanks to the agreement on interest rate reduction and extension of terms, Kyiv will save $11.4 billion over the next three years.
Economists who study the impact of public debt on economic development, however, note that the deal was "relatively modest." Frederic Musso from the Oakland Institute (USA) compares the agreement "with a drop on a hot stone", because "even with this agreement, Ukraine remains the economy with the third largest debt to the IMF." In a commentary for the Berlin edition, he points out that $8.67 billion is a "small thing" compared to the total debt of $143 billion.
Although the Ukrainian government avoided bankruptcy due to the agreement, "for the population, this is anything but bad news," Musso continues. He points out that such agreements are always accompanied by requirements for "structural restructuring, which includes many expensive measures for Ukrainians." Among the obvious measures, Musso names the reduction of gas and electricity subsidies for the population, pension reform, privatization of agricultural lands and state enterprises.
This time, tax increases for the population will be added to this list, "as if the loss of important public goods and social security systems were not enough," commented Musso.
The situation for the population is "catastrophic". Berliner Zeitung reminds that Ukraine failed to achieve its goal in the negotiations, instead of the 60% discount that Kyiv demanded, the creditors agreed to only 37%. Creditors justified their agreement to a discount for Ukraine by the fact that they expect "to be able to contribute to the future recovery of the country for the benefit of the Ukrainian people."
