War in Ukraine: kyiv on the brink of default

The armed conflict between Russia and Ukraine is entering its 171st day this Saturday, August 13. Although Ukrainian wheat exports have resumed thanks to an agreement concluded on July 22 between the two parties under the aegis of the United Nations and Turkey, kyiv is nonetheless on the verge of default. .

Indeed, the rating agencies S&P and Fitch have downgraded Ukraine, now only one notch from default, after the announcement of a moratorium on its external debt obtained Wednesday from its international creditors.

Standard & Poor’s downgraded the ratings of long- and short-term debt in foreign currencies from CC/C to SD (“selective default”).

The agency said in a statement that “Given the announced terms and conditions of the restructuring, and in accordance with our criteria, we consider this transaction as (…) equivalent to a default”.

Ukraine has obtained from its international creditors a two-year moratorium on its external debt, estimated at 20 billion dollars.

Fitch, for its part, downgraded the long-term debt from C to RD (“restricted default”).

Neither of the two agencies, however, accompanied this rating, given its character, with an outlook indicating whether it plans to raise or lower it, or maintain it.

Note that a country is considered in default of payment when it is unable to honor its financial commitments to its creditors, which may be States, financial institutions (International Monetary Fund, World Bank, etc.) or investors in the financial markets. The default is qualified as partial when the State does not reimburse part of its obligations.

A group of Western creditors including France, the United States, Germany, Japan and the United Kingdom had agreed on July 20 to a postponement of interest payments on the Ukrainian debt after a request from kyiv, urging other bondholders to do the same.

As a reminder, the Ukrainian economy has collapsed since the start of the war with Russia launched on February 24 and could see its GDP plunge by 45% this year, according to the latest estimates from the World Bank in June.

Measures to defer Ukraine’s payment of its bonds could save it at least $3 billion over two years, according to calculations by the Bloomberg agency.

Two dead on Friday

In addition, on the ground, at least two people were killed and 13 others injured Friday in a Russian bombardment on Kramatorsk, the last major city still under Ukrainian control in the Donetsk region, in eastern Ukraine.

According to the governor of the Donetsk region, Pavlo Kyrylenko, “a new attack on Kramatorsk – according to first information, we have two civilians dead and 13 wounded with certainty. The shelling damaged at least 20 buildings and a fire broke out”

In a Facebook post, Kyrylenko called on local people to evacuate.

Visa ban for all Russians?

A visa ban for all Russians to punish Moscow for the war in Ukraine will be discussed at the end of August by the European Union.

This measure, demanded by the Ukrainian authorities and mentioned by the head of Czech diplomacy Jan Lipavsky, continues to divide within the Union, where the “European sanctions” must be adopted unanimously by the 27.

For Jan Lipavsky, whose country chairs the EU Council, “a total ban on Russian visas by all EU member states could be another very effective sanction against Russia”.

He pleaded in the sense that “in this period of Russian aggression, which the Kremlin continues to intensify, there can be no question of tourism as usual for Russian citizens”.

The Czech minister must however convince the head of European diplomacy, the Spaniard Josep Borrell, who chairs the Councils of Ministers of Foreign Affairs and Defence. Proposals for sanctions are one of its prerogatives.

The Commission does not hide its reservations about a measure that would penalize all Russian nationals and insists on the need to protect dissidents, journalists and families.


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