Ukraine talking to major institutions about ways to reduce debt payments

FILE PHOTO: Ukrainian flag flutters, amid Russia’s invasion of Ukraine, in Kyiv, Ukraine May 12, 2022. REUTERS/Viacheslav Ratynskyi

KYIV — Kyiv is talking to major international financial institutions about ways to reduce debt payments in the near future, Ukraine’s government commissioner for public debt management Yuriy Butsa said on Thursday.

The remarks came a day after Ukraine asked its international creditors, including Western powers and the world’s largest investment firms, to freeze payments for two years so it could focus its dwindling resources on the war with Russia.

The delay was quickly backed by major Western governments and heavyweight funds that have lent to Kyiv.

“We are also talking to international financial institutions. The legal approaches could be different,” Butsa told a conference arranged by the Kyiv-based Center of Economic Strategy think tank.

“It’s a little early to talk about the mechanics, but we discussed these issues with these creditors and our thinking is going in this direction,” he said.

Butsa noted that in 2022, Ukraine was on paper set to pay the International Monetary Fund more than it would receive. Arranging a new IMF program was not possible given the current circumstances, he said.

“We are talking with the IMF and other partners about what the solutions might be. We need liquidity from the IMF to replace these outflows,” he said.

Ukraine estimates the costs of the war combined with lower tax revenues has left a $5 billion-a-month fiscal shortfall – or 2.5% of pre-war GDP. Economists calculate that pushes the annual deficit to 25% of GDP, compared with 3.5% before the conflict.

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