Page 40 - Ukraine OUTLOOK 2024

In October, the IMF assessed Ukraine's total public debt in 2023 to 88.1%
of the country's GDP, and has been rising slowly, but steadily. According to forecasts for 2025, public debt will exceed 100% of GDP.
Ukraine’s debt has been creeping up from around 35% of GDP at the time of the EuroMaidan revolution and is approaching 90% of GDP. Anything above 60% is considered too much.
There is a debate amongst economists as to whether debt will go over 100% of GDP. On the one hand Ukraine clearly needs a lot of money, but while the war is on it has been cut off from the international capital markets.
Sales of the Ukraine’s Ministry of Finance federal treasuring bonds (OVDP) are still happening but with rates of around 19% this debt is very expensive and short-term. The MinFin is raising about $9bn in dollar equivalent with the OVDPs that help manage the budget, and rates are slowly coming down and investors are buying at the longer end of the yield curve, but OVDPs are neither able to fund the budget deficit completely nor the rebuild.
However, with the economy growing again and anticipated to grow by at least 4% over the next few years, the rising debt is offset by the expanding economy, which will contain the debt-to-GDP ratio. Moreover, when the war finally ends an economic bounce-back boom is expected which should further ease the debt burden in terms of GDP, so the debt burden is not yet considered to be an acute problem.
The Ministry of Finance has postponed the repayment of Ukraine's foreign debts, which will save up to $15bn. Finance Minister Serhiy Marchenko signed an amendment to the memorandum of understanding (MoU) that postpones state and state-guaranteed debt payments with a group of official creditors from the G7 and Paris Club countries. This is part of a $122bn international support package. Payments are suspended until the end of March 2027, Marchenko noted. The Ministry of Finance signed an agreement with representatives from Canada, France, Germany, Japan, the UK and the US. This is the first stage of restructuring. As part of the second stage, planned for the first half of 2024, negotiations will be held on postponing payments on external commercial debt. This applies to $3.2bn in Eurobonds and GDP warrants issued during the state debt restructuring in 2015. Through these two stages of restructuring, Ukraine will be able to save about $14.8bn on debt payments up until 2027. The agreements will also reduce external financing and help the NBU preserve gold and foreign exchange reserves and maintain exchange rate stability.
The IMF supports a moratorium on Ukraine's national debt payment until 2027. To that end, the restructuring will be carried out by the middle of 2024, said the head of the IMF mission in Ukraine, Gavin Gray.
"An ambitious external commercial debt restructuring should be carried out in the first half of 2024 to help restore debt sustainability while creating much-needed fiscal space," he said.
The IMF clarified that the official moratorium regarding public creditors will last until the end of the programme with the IMF in 2027, and the moratorium period for private creditors is expected to end in August 2024.
It was reported that Ukraine had started discussions with foreign bondholders regarding the restructuring of $20bn in payments ahead of schedule. This is necessary to attract new financing. Earlier, Ukraine was allowed to postpone debt repayment until 2027 through a decision by a group of creditors, which includes all the G7 countries.
40 UKRAINE OUTLOOK 2024 www.intellinews.com