Ukraine Paves Way for Foreign Debt Moratorium Amid Ongoing Conflict

Ukraine's President Volodymyr Zelenskiy has enacted a law allowing the suspension of foreign debt payments until October 1. This move paves the way for a moratorium that indicates a sovereign default. Ukraine is restructuring nearly $20 billion in international debt, driven by recent geopolitical tensions, with significant negotiations ongoing.

Ukraine's President Volodymyr Zelenskiy has signed a law that allows the Ukrainian government to suspend foreign debt payments until October 1, signaling a possible sovereign default.

This move follows Ukraine's preliminary deal with its main bondholders to restructure close to $20 billion in international debt, driven by the full-scale Russian invasion in 2022. This is Ukraine's second such restructuring in a decade, following a similar situation after Russia's 2014 invasion of Crimea.

The proposed 37% nominal haircut on Ukraine's outstanding international bonds aims to save Kyiv $11.4 billion in payments over the next three years. Bondholders have until Aug. 1 to approve this deal, with a 10-day grace period for a $34 million payment on its 2026 Eurobond. Ukraine's Finance Minister, Sehriy Marchenko, noted the difficulties in the negotiations due to differing assessments of Ukraine's current situation.

(With inputs from agencies.)