A market-friendly debt suspension in Ukraine

After multiple assertions that it would continue servicing its debt, Ukraine’s government finally gave in to the inevitable, proposing to suspend Eurobond payments for two years and offering a voluntary reprofiling to investors. The G7 and Paris Club announced a similar plan to suspend Ukraine’s debt service until the end of 2023. With no haircuts involved, bondholders are likely to accept the proposal.

What you will learn:

• Reprofiling will save Ukraine about $6bn over the next two years.

• While helpful, the figure pales alongside Ukraine’s fiscal gap, which, even after restructuring, will come to $5bn-$6bn a month.

• The country will continue to rely on external funding to finance the gap. And as the funding for the most part is in the form of loans, not grants, further, less market-friendly restructuring will likely be needed in 2024.