Money Pit: Zelensky govt signals intent to default on tens of billions in foreign debts

by | Jul 21, 2022


Western governments have allocated well over $100 billion to prop up Ukraine in its war against Russia, with countless billions more flooding into the country at an increasing pace. Yet as each day passes, it’s becoming more and more clear that all of the money awarded and assigned to Ukraine continues to dissolve into a black hole of secrecy, corruption, deceit, and now, default.

On Wednesday, Ukraine finance ministry asked foreign creditors to accept a delay in its debt repayments, requesting a two year freeze on billions of dollars in Eurobonds. Per the Financial Times, “a rescheduling would amount to a Ukrainian default” on Kiev’s tens of billions in foreign debt.

The news comes just one day after the EU ambassador to Kiev insisted that Ukraine would not default on its foreign debt.

The junk-rated sovereign has a balance of about $25 billion of foreign debt, Bloomberg reports.

Despite all of the money coming in from around the world, Ukraine’s budget deficit has spiraled out of control. Zelensky’s office now claims to have a $9 billion monthly budget deficit, up 80% from just last month.

“Ukraine’s dollar bonds due in 2033 are trading around 18 cents on the dollar, down from about 25 cents at the end of last month and more than 80 cents before Russia’s invasion in February,” the Bloomberg report adds, highlighting the continuing decline of creditor confidence.


Ukraine estimates a 35 to 45 percent crash in its GDP this year. The government in Kiev is hoping to finalize the debt deferral by August 9, Reuters reports.

As we’ve covered in depth at The Dossier, Ukraine is losing both the economic war and the war on the physical battlefield, but the Zelensky government continues to dismiss the prospect of an armistice or peace deal with Moscow.

In addition to the government as a whole, Ukraine’s state-owned infrastructure and national energy companies have also announced their intent to default on international bonds. Earlier this week, Kiev announced that it has sold some $12+ billion in gold reserves since the start of the war.

The Western government creditors of Ukraine released a joint statement in support of Ukraine’s debt freeze, adding that they “will continue to closely coordinate and assess the situation with the support of the IMF and the World Bank.”

Translation: Western governments will continue to print huge amounts of cash and launch it in the direction of the Ukraine operation. 

While this default will not stop the West’s perpetual Ukrainian money train operation, it sends a very loud $25+ billion signal to greater credit markets. What if other countries follow suit, citing other “national emergencies” and the like? Is the “Climate Emergency” now grounds for default?

Reprinted with permission from The Dossier.
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