Ukraine is likely to declare a default on its debt obligations next month, according to forecasts from the American investment firm Goldman Sachs. The country will leave international investors holding around $19 billion in foreign loans at risk of loss or partial write-off.
The American bank claims that the most likely scenario is that Ukraine will be unable to pay coupons on its bonds on July 24. As a result, analyst Andrey Mateni states, 'at this point, it will enter into default.' The process will begin with a so-called 'moratorium' - a law that will allow the government to suspend payments on its debts.
It is worth noting that Ukraine's Finance Minister Natalia Yaresko did not deny this scenario, also acknowledging a potential default in July.
Four creditors holding around $9 billion in unpaid debt are currently engaged in tense negotiations with the government regarding the process of debt asset restructuring. A debt write-off, creditors recently stated in a letter, will delay Ukraine's possible return to global capital markets.
However, at meetings scheduled for next week in Washington, Ukraine will once again try to persuade creditors to make concessions.
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Meetings will involve creditor advisors, the Ukrainian Finance Ministry's team, and International Monetary Fund representatives. It is unclear whether investors will personally take a seat at the table. The Finance Ministry will send Vitaly Lisovenko, a special envoy for state debt negotiations.
Creditors will be represented by Michael Hazensteb, a true bond guru in countries with developing economies, who has invested over $7 billion in Ukraine in recent years.
Finance Minister Natalia Yaresko warned creditors that they might face a write-off of 40% of their investment value in exchange for new bonds tied to the country's future economic activity.
It is worth noting that the Ukrainian government initiated negotiations on restructuring foreign debts back on March 13. It was then that the International Monetary Fund approved a $17.5 billion assistance program for the country.
During negotiations with creditors, the Ukrainian side insisted on extending payment deadlines and writing off part of the debt to help avoid default.