Ukraine Reaches Agreement to Restructure Debt

Ukraine reached an agreement with a group of its creditors to restructure its debt and avoid a looming default. The investors will accept a 20% write-off on the estimated $18 billion in debt on the country’s bonds and accept a freeze on repayment for the next four years. The Ukrainian finance ministry has lauded the deal as favorable to Kiev and IMF chief Christine Lagarde has also endorsed the deal.

The timing of the deal is also being described as fortuitous as it coincides with growing sentiment that the Ukrainian economy is stabilizing. Both currency and inflation problems appear to have been mitigated at least for the short-medium term, and the country will maintain access to capital markets as a result of the debt deal.

The Ukrainian security situation, however, remains precarious, with continued reports of violence in the country’s east and recent calls for a new accord to replace the Minsk II accord signed in February.  The Ukrainian president has already rejected the rumor that a new accord could be brokered, making the status of any new peace negotiations uncertain.

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