20 July 2022
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Ukraine is today expected to take the first step towards defaulting on its foreign debt by asking its foreign creditors to agree to a two-year suspension according to sources reported in the Financial Times.
In response, Heidi Chow, Executive Director of Debt Justice (formerly Jubilee Debt Campaign) said:
“Money has been pouring out of Ukraine throughout the conflict in debt repayments. Instead of meeting the urgent needs of the Ukrainian people as they face Russian bombs and tanks, aid from the West has been diverted into the pockets of banks and bondholders. Many have made huge profits after buying the debt cheaply. Private lenders need to agree now to the suspension of payments, and to eventual debt cancellation after the war.”
Yuliya Yurchenko of Ukrainian social movement Sotsialniy Rukh said:
“In current conditions, servicing Ukraine’s debt is possible only if the military and other most urgent needs of the people are neglected. Astronomical amounts of funds will also be needed after the war to rebuild the country. This can only mean one thing – it is time for large-scale multifaceted international assistance and debt cancellation.”
Ukraine is requesting an urgent multi-billion dollar loan from the IMF. IMF policy is not to lend to countries with unsustainable debts, but its policies can allow it to lend to countries in default on the condition that the loan is not used to pay off creditors.
Ukraine was due to make debt repayments of $7.3 billion in 2022, of which $4bn was due to private creditors. Its total debt stands at $54.3 billion.
Ukrainian dollar-denominated bonds have been trading at around 30 cents in the dollar, reflecting the high risk of default, so if paid if full Ukraine’s private creditors could make profits of over 300%.
- The Finance Ministry will make a formal request for a delay to payments, according to sources reported in the Financial Times.
- Debt Justice (formerly Jubilee Debt Campaign) is a part of a global movement to end unjust debt and the poverty and inequality it perpetuates: debtjustice.org.uk