Ukraine has declined to pay holders of $2.6 billion in warrants linked to the country's GDP, defaulting on its sovereign debt payment, the Wall Street Journal reported on June 3.
The country's Finance Ministry announced last week it would skip a $665 million government debt payment after failing to agree on restructuring terms with creditors.
Ukraine said in April it had failed to reach an agreement to restructure a debt consisting of so-called GDP warrants, a financial instrument that gives the debtholder the right to additional payments based on economic performance.
"Ukraine remains committed to implementing a comprehensive, fair and equitable restructuring of the GDP-linked securities," the Finance Ministry told Bloomberg last week, saying that the non-payment is linked to a broader restructuring of the country's obligations.
Ukraine's economy has struggled in the face of Russia's war. Its GDP fell drastically in the early days of Russia's full-scale invasion and has steadily grown since.
The European Bank for Development and Reconstruction (EBRD) forecasts Ukraine's GDP will grow 3.3% in 2025, down from an initial forecast expecting growth of 3.5%.
"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," Finance Minister Serhii Marchenko said in April.
The International Monetary Fund (IMF) has warned that failure to resolve the GDP warrant issue could threaten further debt restructuring, as well as an ongoing $15.6 billion bailout program, the Extended Fund Facility (EFF). Ukraine has said it will seek to abide by its agreements with the IMF.
Kyiv reached an agreement with some of its creditors in July 2024 to restructure more than $20 billion in international bonds, allowing Ukraine to avoid default amid Russia's full-scale war. The Finance Ministry announced last September it had reduced state debt by $9 billion after completing an external debt restructuring process.
Oleg Sukhov
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