Ukraine's default is getting closer: the agreement with private creditors on a two-year deferral of debt payments expires in August 2024. Everyone hoped that during the negotiations, the creditors would agree to further debt restructuring, since Ukraine will not be able to repay them in the summer of 2024.
However, Ukraine has not yet been able to reach an agreement with the holders of 20% of the bonds on a debt restructuring of $20 billion. The creditors rejected Kyiv's proposal to reduce the value of foreign currency bonds by 60% and proposed to reduce it by 22%. But here the IMF came to our side, stating that this would lead to a default on key debt obligations. The Ukrainian Ministry of Finance also proposed launching a contingency instrument, payments under which could begin only after 2027 and would depend on Ukraine meeting the tax revenue targets set by the IMF.
The continuation of negotiations has been announced, and Finance Minister Marchenko expects them to be successfully concluded by August 1. However, Ukraine's Eurobonds immediately fell by 1.5 cents in the absence of new agreements.
If default does occur, it will be our third “technical default” in the past ten years. The country has accumulated an unsustainable external debt due to the war, and if it is not closed, the Ukrainian economy will face a full set of consequences standard for a sovereign default: capital outflow, devaluation of the hryvnia, and economic recession. The government will further cut social spending – pensions, benefits, and benefits. Prices will rise, living standards will fall, and business will collapse.
