Page 18 - bne IntelliNews monthly magazine October 2024

18 I Companies & Markets bne October 2024
The newly agreed restructuring only covers Ukraine’s international market bonds, which account for $24bn, or approximately 15% of the country’s total debt, which exceeds $140bn.
Additionally, Ukraine still needs to negotiate a separate restructuring deal in the coming months of $2.6bn in GDP warrants issued during the 2015 restructuring and that were just starting to pay out to investors before the war started.
Real challenges may arise in 2027 when Ukraine's official creditors will need to restructure their own debts at the end of the current IMF programme. Kyiv is expected to record a deficit of $43bn this year to cover high military expenditures amid delays in Western aid earlier this year.
Government short of cash
The government is already running short of money as there is
a $12bn hole in the budget due to increased military spending and the government is mulling raising taxes and cutting non-essential spending to cover the shortfall. Ukraine will also need to cover a budget deficit of $35bn next year. The Ministry of Finance (MinFin) has also said there is a $15bn hole in the 2025 budget forecast too, due to dwindling international support.
In August, the state budget's general fund received about $8.4bn in external financing. As noted by the Ministry of Finance, $5.5bn comprised grants (65%), and $2.9bn arrived through preferential financing. This includes $4.5bn in concessional financing and a grant from the EU and a $3.9bn grant from the US.
The funds from the EU are the first regular tranche (provided upon fulfilment of conditions) within the framework of the Ukraine Facility. The financing consists of a $2.9bn loan and a $1.6bn grant.
Kyiv received the grant from Washington through the World Bank's Peace in Ukraine project. The funds are to be used for
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salaries of teachers, emergency responders, civil servants and social expenses. In total, this year Ukraine has already received $24.5bn in external funding, including $6.6bn in grants.
In addition, in August the state budget’s general fund received UAH386.2bn ($9.4bn) in taxes, fees and payments. This is 200% more than in July.
Last-minute deal
This restructuring is the second Ukraine has been forced to undertake in a decade following Russian military aggression. The previous restructuring occurred in 2015 after Russia’s annexation of Crimea. The current process required the backing of at least two-thirds of Ukraine’s bondholders, along with a simple majority in each of the individual bond series involved.
The negotiations, which took only four months, proceeded at an unprecedented pace, replacing a two-year bond payment moratorium granted to Ukraine in the summer of 2022, now nearing expiration.
Yuriy Butsa, head of Ukraine’s debt agency and a central figure in the negotiations, remarked on the unique nature of this restructuring. “This has not been driven by any unsustainable economic policies,” Butsa told Reuters. “It is driven solely by the Russian aggression against Ukraine,” adding that the process had been one of the quickest debt restructurings in history.
The Group of Creditors of Ukraine, comprising the country’s bilateral lenders, including Canada, France, Germany, Japan, the United Kingdom and the United States, welcomed the agreement.
“The swift implementation of the exchange demonstrates substantive support for the government and people of Ukraine by providing substantial debt relief,” the group told Euroactiv.
Nebius enters European AI infrastructure race with multi-billion-dollar investment plan
Vladimir Kozlov in Cyprus
Nebius, an AI firm formed as a result of a spinoff of Russian IT giant Yandex' international business, has announced the launch of a new GPU cluster in Paris. The move comes as part of the company's plans to invest more than $1bn by mid-2025 in AI infrastructure in Europe.
“We work in a new industry which requires both deep
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technology and significant capital," Arkady Volozh, founder and CEO of Nebius, said in a statement shared with
bne IntelliNews.
"Our data centre in Finland already provides the latest high- performance compute, tools and services to AI developers around the world. The addition of our new GPU cluster