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The Real Purpose Of Ukraine’s ‘Peace Conference’: Asking For A 60% Reduction In Western Debt

The Financial Times has published an article describing a key meeting between the Ukrainian Finance Ministry and Officials attending the Peace Conference held over the weekend in Lucerne, Switzerland. The newspaper reported that Ukraine had asked for its official bondholders to take a 60% haircut on foreign exchange bonds due in August of US$20 billion. Those bondholders are mainly Western financial and private institutions. 

The Ukraine Ministry further stated that its official creditors should only receive ‘symbolic debt repayments’ from mid-2024 to end 2027.

An official bondholders committee, formed to discuss the issue, commented that “Ukraine’s proposal is significantly in excess of market expectations and risks substantial damage to Ukraine’s future investor base.”

Bondholders had originally granted Ukraine a two-year moratorium on payments in early 2022, but this is set to run out in August. The talks on a further restructuring reflect deep Western investor uncertainty about the course of the conflict with Russia and how much debt Ukraine’s economy will be able to carry.

An investor committee representing about 20% of the bonds proposed cuts of just over 22% instead of Ukraine’s suggested 60%, however the IMF said this would also fail key debt targets.

Talks apparently failed to reach a compromise and will present a new concern to Ukraine’s financial backers, although negotiations will continue. The revelations that these discussions took place imply that the Peace conference was actually a front for Kiev to ask its backers to take a 60% haircut on pre-conflict Ukrainian government bonds that had been issued and are now coming due.

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