Debt Deal Reached

Private investors hold about $19 billion of Ukrainian debt. Ukrainian Finance Minister Natalie Jaresko had called for a 40 percent haircut on the bonds. However, all parties agreed to a 20 percent haircut on August 27th. The resolution of Ukraine’s debt saga looks like a great success for all parties involved. The IMF has changed the rules of the game as it desired. The bondholders will still do well. Ukraine got the necessary debt relief.

Opinion of ANDERS ASLUND, Swedish economist and a Senior Fellow at the Atlantic Council

Things Are Looking Up for Ukraine: Debt Deal Reached

Today Ukraine received great news. Private owners of $19 billion of Ukraine's Eurobonds have agreed to a substantial debt restructuring that will give Ukraine much-needed relief. The high bond yields have been sharply reduced, the bonds' maturities have been prolonged, and the face value of the bonds has been reduced by 20 percent.

According to the International Monetary Fund (IMF), this agreement has reduced Ukraine's financing needs for the next four years by no less than $15 billion. This is a huge achievement for Ukraine's government, and Kyiv managed to accomplish this without having to impose a moratorium on debt repayment.

The demand for a reduction of the privately held public debt arose early this year. On February 12, the IMF concluded a four-year stabilization loan, called the Extended Fund Facility, with Ukraine. On March 11, the IMF board approved this $40 billion agreement, but the financing was problematic. The IMF itself committed $17.5 billion. Somewhat optimistically, it presumed that the World Bank, other international financial institutions, and bilateral donors would put up another $17 billion, but that left a $15 billion gap.

Source: http://www.atlanticcouncil.org