Ukraine fails to reach deal on restructuring $2.6 billion debt, faces default

The Ukrainian government said on April 24 that it has failed to reach an agreement with its debtholders to restructure some $2.6 billion of debt.

This means Kyiv might have to default on paying some $600 million ahead of the deadline in late May.

"Ukraine indicated that it could not accept the Restricted Holders’ Proposal and declined to make any further proposal to the Restricted Holders before the end of the Restricted Period," the Ukrainian government said in a statement after April 15-23 talks in Washington.

Kyiv nevertheless pledged to continue to engage with its debtholders and seek other options for restructuring the debt.

The $2.6 billion sum concerns the so-called GDP warrants, a financial instrument that gives the debtholder the right to additional payments based on the country's economic performance.

"The GDP warrants were designed for a world that no longer exists. Ukraine's modest economic growth in 2023 was not a sign of surging prosperity but a fragile rebound from a nearly 30% downturn caused by Russia’s full-scale invasion," Ukraine's Finance Minister Serhii Marchenko said in a statement.

"These financial instruments must not become an obstacle to our recovery. Our objective is to reach a fair and comprehensive solution to this issue."

The warrants were not part of last year's deal to restructure some $20 billion in national debt. That agreement, concluded with some creditors in July 2024, allowed Ukraine to avoid default and continue financing its defense against Russia's full-scale war.

The International Monetary Fund (IMF) has warned that failure to resolve the warrant issue could threaten further debt restructuring, as well as its ongoing $15.6 billion bailout program, the Extended Fund Facility (EFF).