Page 12 - UKRRptNov23

Following the start of the war 19 months ago, Ukraine’s bond and GDP warrant obligations were suspended, but the coupon payments on some of these obligations is due to resume next year and the bulk of the bonds in 2027.
The government is hoping to restructure this year as its ability to raise funding from its international partners is in increasing doubt for the new year.
Renewing agreements on debt restructuring as swiftly as possible could facilitate access to new sources of financing as according to the recently published draft, half of the government’s funding will be sourced from international donors, according to Ukraine’s 2024 budget plan.
Previously, discussions with bondholders were slated to commence in early 2023. Bondholders agreed in August 2022 two a two-year payment freeze after Russia's invasion in February shattered its economy and finances, forcing it into a sovereign default, Reuters reports. Most of Ukraine's bilateral lenders have suspended repayment obligations until 2027 - and some analysts had expected Ukraine might ask its bondholders for a matching extension.
Ukraine secured the option to defer debt repayments until 2027 through an arrangement with the Group of Creditors, comprising all G7 member states. This deferral aligns with the duration of the ongoing International Monetary Fund (IMF) $15.6bn Extended Fund Facility (EFF) program that was approved in April and is set to conclude in 2027.
Currently the talks are still informal, and bondholders have yet to form a creditor committee, sources told Reuters.
Gavin Gray, the head of the IMF mission to Ukraine, said the IMF's readiness to assist Ukraine in preparing for the restructuring of its national debt. In comments Gray made in Kyiv last week, he warned that the Ukrainian government needed to increase its tax collection against “a possible decrease in international financial support”. Gray also appears to be the driving force for an early debt restructuring deal to head off funding problems later.
As part of this restructuring, it is anticipated that Ukraine will issue new bonds.
The restructuring is also driven by the steadily rising public debt as much of the international aid given to the government is in the form of loans, not grants.
Public debt is expected to reach 110.7% of GDP, up from 97% in 2023 and 78% in 2022, surpassing the "safe" limit for economic growth (64% for developing countries), according to Kyiv School of Economics (KSE).
“Post-war fiscal consolidation will be challenging, so the government may negotiate debt restructuring in 2024, given the two-year deferral period for payments on Eurobonds and GDP-linked warrants under the terms of the restructuring conducted in August 2022 will expire,” KSE said in a recent note.
While economic growth went back into the black over the first nine months of this year and tax revenues are expected to grow by 25.6% y/y in 2024 to $41.1bn according to the optimistic outlook defence and security expenses of $41 bn, or 21.7% of GDP, will consume all of the state’s income. With increases in social spending and the run of the mill government expenses the 2024 budget anticipates a $39bn deficit (20.4% of GDP), which will be almost
12 UKRAINE Country Report November 2023 www.intellinews.com