Ukraine has one month to avoid default – The Economist

The war is dealing a severe blow to Ukraine’s economy. The country’s GDP is a quarter less than it was before Russia’s invasion, and recent attacks on infrastructure have lowered growth forecasts. Ukraine has a month to avoid default.

This was reported by The Economist.

The publication considers it “unlikely” that a new agreement with creditors regarding debt servicing payments will be reached by August 1, when the current agreement expires.

“If Ukraine declares default, it will reflect a worrying lack of confidence among private investors in Western commitments. In the long term, this could mean disaster for the country’s recovery,” the article states.

In June, Kyiv proposed to creditors to reduce the current value of Ukrainian debts by 60%, while creditors offered 22%. But even Ukraine’s proposal would only allow it to “make ends meet.”

By the end of the year, the debt-to-GDP ratio is expected to approach 94%.

Without a deal, Ukraine has two options: negotiate another extension of the debt servicing freeze or declare default.

Bondholders also doubt that Ukraine’s long-term recovery will bring them profits and allow for debt repayment if they write off debts now.

Previously, Ukraine failed to reach an agreement with holders of 20% of bonds on restructuring $20 billion in debt.

It is worth noting that the IMF has downgraded its forecast for Ukraine’s economic growth in 2024.