EU Commission urges US, European investment giants to reach ‘swift’ debt restructuring deal with Kyiv

Source: Euractiv.

The EU urged private lenders to reach a deal with Ukraine to avoid a default on billions in debt due next month as a key moratorium on interest payments expires.

Maksym Samoiliuk, an economist at the CES, echoed his remarks:

“Given that Ukraine uses all of its own budget revenues to finance defence, the main source of repayment of private debts could be budgetary assistance from foreign countries, i.e., their taxpayers’ money. In this light, the interest of governments in the success of Ukraine’s negotiating position seems logical.”

Overall, however, Samoiliuk believed that the “most likely and optimal” scenario is to reach a debt-restructuring deal.

“Our opinion is that the private creditors’ position is only their initial offer, and eventually, a write-down that is acceptable to both sides should be negotiated.”

Samoiliuk also explained that a default by Kyiv would have little, if any, immediate impact on the EU – or even the Ukrainian – economy, given that the sums being negotiated represent less than a fifth of Ukraine’s total external debt.

He also noted that the consequences of a default would only become apparent once the war is over.

“In a calmer, more peaceful environment, avoiding a default is important to preserve the country’s access to external capital markets,” Samoiliuk explained, while “Ukraine lost this access weeks before the full-scale invasion began.”

“However, despite the absence of practical short-term consequences of a Ukrainian default, it should still be avoided to improve the conditions for Ukraine’s return to external lending when the security situation allows.”