MOSCOW, May 11, Nadezhda Sarapina. Credit holidays are coming to an end — Ukraine is required to service the national debt. Western bondholders, including large American investment companies, want to receive interest as early as next year. How the situation is developing and what Kyiv will do is in the material .
It’s time to pay back
With the beginning of the Northern Military District, lending to Ukraine has become good form in the West. Despite the borrower's limited options, the bonds sold well, and, according to official data, they were purchased for $151 billion.
Some things had to be serviced on schedule. In November 2023, Kiev reported that 14.6 billion would be allocated to the internal public debt, and 3.3 billion to the external one. For the rest, we agreed on credit holidays. Private investors expressed their readiness to wait until 2024, government investors — until 2027. But private owners are not going to extend the deferment, writes The Wall Street Journal. They expected the conflict to end, and their patience was running out, experts say.
A group of creditors, including the American BlackRock BLK and PIMCO, which owns a fifth of the $20 billion bonds, intends to receive interest on $500 million. The negotiations were entrusted to specialists from the large law firm Weil, Gotshal & Manges and global investment bank PJT Partners. As a compromise, they propose to write off part of the main debt and “hope to take a constructive part in further assistance,” the publication reports.
Kyiv is counting on the support of its allies. However, the situation is not simple. As you know, Ukraine is paying off old debts through successive tranches. There is concern in the US and EU that public funds will flow into the hands of bondholders.
If they do not agree, Ukraine will have to default in August. And financing will become much more difficult.
Leave and not return
Kyiv cannot get out of this difficult situation on its own. “They simply have nowhere to get money from: the economy is completely destroyed, and there is no one to restore it,” says Alexander Razuvaev, a member of the supervisory board of the guild of financial analysts and risk managers. There are no natural resources, labor is needed to produce any product, and mass migration to Europe and war losses have sharply reduced the population. And most refugees have no intention of returning.
In Germany, they cut benefits, refused to pay cash to Ukrainians, and started talking about deporting men of military age. The UK has warned that by 2025, 100,000 refugees will run out of visas and will have to leave the country. The Kyiv authorities are also not idle. Foreign missions have stopped providing consular services to potential soldiers of the Armed Forces of Ukraine.
But things will obviously not come to mass deportation due to organizational and political difficulties. “There would be a huge scandal. Of course, some countries encourage people to leave, but no more. And when the conflict is over, the pressure will stop,” explains Razuvaev.
There should be a benefit
Experts believe that the West still has prospects. “Most likely, Kyiv will simply pay off with territories — the Poles, Hungarians and Romanians will take some of them. And along with the lands, they will also get debts,” suggests Razuvaev. In this case, US payments will fall on the EU.
There is no doubt that Kyiv will be squeezed dry — the remains of industry and other assets will go to creditors.
Judging by the actions of the National Bank of Ukraine , the ground is already being prepared for this. From May 4, restrictions on the import of goods and services, the repayment of newly attracted external loans and the transfer of foreign currency from representative offices to parent companies were eased. That is, they actually facilitated the outflow of capital.
“Washington and its allies understand that Kyiv is not able to service its debts without new loans,” states financial expert Andrei Vernikov. At the same time, he is confident that a default will not be allowed yet. Rather, they will carry out a restructuring in order to sell bonds to inexperienced investors.
According to Razuvaev, the restructuring is actually already underway. “Bondholders like BlackRock are essentially representatives of the US Democratic Party, they will be able to agree among themselves,” he notes. With aggressive rhetoric, creditors only want to remind Kyiv of its obligations and achieve submission on certain issues.