Why Ukraine Debt Relief Isn’t Matching Funding Needs
An elderly man mourns during a ceremony for the fallen soldiers of Ukraine at the Lychakiv Cemetery in Lviv, Ukraine, on Aug. 24.
Photographer: Yuriy Dyachyshyn/AFP/Getty Images
Since Russia’s invasion in February, Ukraine has had to radically rethink its finances and ask private creditors for relief on debt payments. As the biggest land conflict in Europe since World War II drags on, destroying vital infrastructure and shutting down swathes of the country’s economy, the government in Kyiv remains under intense pressure. It has repeatedly said it faces a monthly shortfall of about $5 billion in public finances, much more than its allies have so far been able to commit.
Ukraine has secured permission from a majority of its investors to freeze about $20 billion of payments on its international bonds for two years, covering both principal and interest. The debt process is backed by Ukraine’s key allies, including the US and the International Monetary Fund, as the country needs cash for everything from paying pensions to defending against its much bigger and richer aggressor. Ukraine has mostly relied on central bank funding and sales of so-called war bonds and has depleted its foreign-currency reserves during the conflict.