What happens to the state debt of Ukraine during the war with Russia
Even on the eve of Russia’s invasion of Ukraine, in the wake of alarming media forecasts, foreign investors began to get rid of Ukrainian Eurobonds. After February 24, this process accelerated. In particular, according to Bloomberg, the yield on securities maturing in September 2022 rose to 204.3%. This suggests that investors practically do not believe in Ukraine’s ability to fulfill this obligation. Focus.
payment discipline. How Ukraine now pays off with creditors
“We fulfill our debt obligations in full. Yesterday [1 марта 2022] the coupon payment on Eurobonds maturing in September 2022 has taken place,” Finance Minister Serhiy Marchenko said.
On the eve of February 28, The Wall Street Journal reported on a conference call with investors in Ukrainian Eurobonds, which took place at the initiative of the Ukrainian Ministry of Finance. During the conversation, a representative of the ministry noted that for Ukraine “it would be more expensive to restructure its debts than to continue paying its obligations.”
As the WSJ writes, the participants of this conference assessed the very fact of its holding as “an impressive demonstration of fortitude” and expressed words of support and good wishes during the dialogue.
The Ministry of Finance assures that even in the face of military aggression, the Ministry of Finance, the Treasury and the NBU ensure that all necessary payments are made. As of February 28, the balances on the single treasury account amounted to UAH 33 billion, which is enough for current payments. For comparison: eight years ago, after the flight of Yanukovych, when the Russian Federation began the occupation of Crimea, there were only UAH 108.1 thousand.
In 2022, Ukraine needs to pay the equivalent of UAH 126.8 billion on foreign debts. ($4.286 billion at the rate of 29.4 UAH/USD). In particular, to pay off and service the public debt in March 2022, Ukraine needs to accumulate UAH 22.3 billion ($758.5 million). Of these, UAH 14.5 billion ($482.7 million) falls on servicing commercial loans. And, as reported above, Ukraine is already fulfilling this obligation. In general, March accounts for the largest monthly external debt payment in the first half of 2022.
The next peak of payments – UAH 52.5 billion ($1.786 billion) – falls on September, when the aforementioned Eurobonds must be redeemed. Obviously, in order to fulfill these obligations, Ukraine will have to rely on new borrowings.
Worldwide support. How much money international donors promised to Ukraine
The Ukrainian Ministry of Finance reports on “round-the-clock” negotiations with international partners on financial assistance. Among them: the IMF, the World Bank, the EBRD, the USA, Canada, the UK, Germany, Japan, Italy, France, the EU, international investment funds, payment systems and banks.
Indeed, while the financial potential of the occupying country is multiplied by zero by economic sanctions, international institutions provide Ukraine with comprehensive support. Firstly, until the end of June 2022, under the current stand-by agreement with the IMF, $2.2 billion is still available to Ukraine. Secondly, next week the fund will consider Ukraine’s request for emergency financing for $1.4 billion. Thirdly, The World Bank, for its part, is preparing a support package for $3 billion in the coming months. The World Bank’s board promises to consider the provision of the first tranche of $350 million by the end of the week.
“And after that, there will be much, much more … for the restoration of the country …,” writes Vladislav Rashkovan, Deputy Executive Director of the IMF, on his Facebook profile. He talks about the absolute support of his colleagues in the IMF Executive Board, with the possible exception of the representative of the aggressor country.
“Our institutions are working together to support Ukraine on the financial and political fronts and are urgently increasing that support. We were in daily contact with the authorities [Украины] about the crisis measures,” the press release of the IMF and the World Bank says.
Western countries are promising significant financial support to Ukraine. In particular, on February 25, the United States urgently allocated $600 million to Ukraine, of which $350 million goes to defense needs. Moreover, the White House submitted a request to the US Congress regarding the provision of $6.4 billion in economic and military assistance to Ukraine. And the National Bank of Poland allocates the equivalent of $950 million to Ukraine, which will allow the NBU to increase international reserves.
A significant amount of funds goes to charitable accounts. In particular, the NBU reports that as of March 2, they have already collected UAH 6 billion (about $200 million) for the Armed Forces of Ukraine. The National Bank opened a multi-currency special account to raise funds for the army on February 24.