Ukraine Seeks to Suspend $19.7 Billion Debt Amid Intensifying War with Russia – International Monetary Fund

Ukraine Pushes for Debt Payment Suspension Amid Ongoing War

Parliamentary Recommendation

Ukraine’s parliamentary budget committee has recommended lawmakers approve a law granting the government the right to suspend debt payments, its head Roksolana Pidlasa announced on Thursday. This move comes as Ukraine, now in its 29th month of war with Russia, seeks to restructure its debts with bondholders before a payment moratorium expires on August 1.

Draft Law Details

The draft law, published on the parliamentary website, includes a clause allowing the government to suspend payments on foreign debts if necessary. “We will ask parliament to support this draft law at the next plenary session, as it is an important element of the restructuring that will allow savings of more than $10 billion on debt servicing on Eurobonds by the end of 2027,” Pidlasa stated on Facebook.

Finance Ministry Statement

Ukraine’s finance ministry highlighted that the law would permit the suspension of payments on all state and state-guaranteed debt with private, external creditors until a debt rework deal, in line with International Monetary Fund parameters, is fully concluded. “The adoption of the law provides Ukraine with the necessary flexibility ahead of reaching an agreement in principle with private creditors,” the ministry stated. Pidlasa mentioned that the suspension would be invoked if an agreement is not reached by August 10.

Outstanding Debt and Warrants

Ukraine has $19.7 billion outstanding on its international bonds and owes $2.6 billion on GDP warrants, a fixed-income instrument with payouts linked to economic growth. These warrants were created as a sweetener to creditors during Ukraine’s 2015 debt restructuring following Russia’s annexation of Crimea. In a recent call with investors, Ukraine indicated its intention to restructure the warrants during the current talks, changing from its earlier plans.

Historical Context

Warrant payments are included in the IMF’s debt sustainability analysis (DSA), and paying those holders would divert funds from the token coupon payments proposed to bondholders under the restructuring. Ukraine previously enacted a debt payment moratorium law in May 2015 amid restructuring talks, reaching an agreement in principle with investors by the end of August and announcing the settlement of the transaction in November.