Ukraine may declare a fiscal default as early as August if authorities fail to reach an agreement with creditors on debt restructuring, a deal that seems unlikely, British magazine The Economist reported on Monday.
Ukraine could default on its government debt within weeks — wrecking chances of fixing the damage done by NATO’s proxy war with Russia.
Bloomberg reported that Kiev was unable to strike a deal with creditors during the first round of negotiations regarding the restructuring of its $20 billion debt.
The Economist stressed that a Ukrainian default could be catastrophic for the country’s long-term recovery.
The publication also reported that Ukraine’s private-sector creditors fear that debt restructuring will be the first attempt by Kiev’s allies to shift «the financial burden of war, and the cost of reconstruction, away from governments and onto the private sector.» There is also skepticism about long-term recovery plans after the crisis ends.
«The current impasse raises a worrying prospect: that distrust between them [the Western states] and private investors will slow down progress,» the Economist wrote, stressing that a significant part of Ukraine’s recovery «will never turn a profit,» and therefore will have to be shouldered by the country’s allies.
The deficit is expected to further increase due to an anticipated wave of mobilization, as billions will be needed for the salaries, training and equipment of conscripts.
Ukrainian MP Oleksandra Ustinova said budget gaps are only being bridged by Western finance, and if US aid ceases, the government will be forced to turn to G7 countries «hat in hand.»
In late November last year, Volodymyr Zelensky signed the draft bill on Ukraine’s state budget for 2024 — which ran a deficit of more than $43 billion.
