It seems that the issue of writing off Ukraine's debt and the agreement with international creditors has seen the light at the end of the tunnel.
The Ukrainian authorities managed to reach a compromise necessary for Ukraine and persuaded creditors to write off 20 percent of the debt. The information is not official yet, but this has been reported by global media citing insiders.
It is still unknown how exactly the write-off of Eurobonds will be carried out, but sources report that a final agreement with creditors will be reached this week.
At the same time, according to sources, the agreement with creditors is still shaky and may be reviewed or even canceled. However, experts claim that achieving the IMF conditions for Ukraine is the main task, and the 20% write-off can be considered a compromise acceptable for both parties.
As is known, initially representatives of Ukraine in negotiations urged creditors to agree to a 40 percent write-off of the country's debt. This did not suit them. In July, Ukraine prepared a new proposal involving some changes, but it did not please international creditors either. The maximum 'haircut' of the debt that creditors allowed during prolonged negotiations was 5%. The Ukrainian side considered this write-off insufficient and continued discussions, which consumed the country's time and brought it closer to default.
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In two months, on September 23, Ukraine needs to repay its debt to creditors, paying them half a million dollars. If an agreement between the parties is not reached, Ukraine may impose a moratorium on the payment of this money. In that case, a technical default will be recorded in the country.
The agreement on debt restructuring will imply significant relief for cash-strapped Ukraine, which is still trying to stabilize its economy while being embroiled in an expensive conflict in the eastern territories. Nevertheless, the agreement will not resolve one of Ukraine's main economic problems: negotiations on natural gas pricing with Russia. It will also not help Ukraine repay the 3 billion dollars debt to Russia at the end of December.
However, there are legal ambiguities surrounding the status of the Russian loan, and if Ukraine refuses to repay the loan on time, the dispute may escalate into a protracted legal battle. Therefore, Ukraine will most likely avoid default in the short term, but will continue to navigate complex financial relations with the Russian Federation.