Ukraine debt restructuring will be very problematic

Significance

The economy is weak and needs financial support. Debt restructuring is part of Ukraine's new IMF extended fund facility (EFF) programme, which itself should unlock a larger rescue package from other lenders to total around 40 billion dollars. Ukraine needs to reach some agreement by end-May -- in time for an IMF review. Private creditors are unhappy about the restructuring. Also, a growing legal dispute between Moscow and Kyiv over Russia's 3 billion dollar Eurobond risks derailing or delaying aid efforts.

Impacts

• The EU-Ukraine summit on April 27 is expected to focus on Kyiv's economic reform plan, as major fears over corruption remain.
• Failure to reach debt agreement risks delays in disbursement of further IMF tranches and may derail Kyiv's donor conference on April 28.
• Debt relief could be achieved by extending debt maturities, cutting interest payments and haircuts.
• The EFF, debt restructuring and further international lending could help Kyiv eventually receive a total of 65 billion dollars.