Ukraine is forced to write off 20 billion dollars of credit funds as debts from private enterprises.
Points of attention
- Ukraine is facing the challenging task of forgiving $20 billion in debt from private enterprises due to difficult financial conditions exacerbated by the Russian invasion.
- The most effective solution for Ukraine is to reduce the debt by 40% and halt the outflow of financial funds to navigate the complex financial landscape.
- Decisive steps are crucial for Ukraine to secure war financing, support economic development, and remain appealing to investors while dealing with old debt obligations.
- The G7 summit pledged to utilize frozen Russian assets to assist Ukraine financially, but the implementation of this support will require time.
- The resolution of Ukraine's debt dilemma is not merely financial complexity but also crucial for the country's future and regional peace post-conflict.
Why Ukraine will have to forgive debts of 20 billion dollars to private enterprises
According to the journalists of the publication, the criminal invasion of the occupation army of the Russian Federation in Ukraine cost Kyiv more than one billion dollars in losses.
Before the large-scale invasion of the criminal army of the Russian Federation, Ukraine was already in a difficult situation with debt after the restructuring of private debt in 2015 as a result of Russia's annexation of Crimea.
However, Ukraine must now balance borrowing to finance the war with managing old debt obligations.
It's a difficult juggling act. Kyiv must meet the fiscal expectations of sovereign and multilateral creditors whose funding supports the military effort and the economy. At the same time, it must remain attractive to private investors, whose cash flows will be crucial the day after the war — when reconstruction must begin in earnest, the publication emphasizes.
How can Ukraine reduce its own debt in the best way
According to the authors of the article, the best solution for Ukraine would be to show interest in bondholders and try to reduce the debt by approximately 40%.
Currently, Ukraine is unable to agree to a complex and long-term bankruptcy agreement and must stop the outflow of financial funds.
Annual payments will be necessary to remain attractive to future creditors, but should be small and symbolic.
At the same time, the authors emphasize that Kyiv should beware of putting too much pressure on bondholders, as they may then sell their debts to hedge funds or other private entities.
At the recent G7 summit, leaders agreed to use interest from frozen Russian assets to help finance Ukraine's military effort. Despite the fact that the agreement is promising for Ukraine's finances, its implementation will take time. In the meantime, bondholders should not treat this like any other sovereign restructuring. War is at stake, the article emphasizes.
